The IRS offers some creative ways to give birthday presents to our aging population. Here are three of them: 1) larger medical expense deductions, 2) larger standard deductions and 3) a larger tax credit for the elderly who are permanently and totally disabled.* Medical Expense Deductions Here's a great benefit, if you're over 65 years of age. You get to deduct all your medical expenses in excess of 7.5% of your adjusted gross income, while the rest of us only get to deduct expenses over 10% of our AGI. This includes an annual physical exam, a full-body electronic scan and a pregnancy test. I'm not sure how many 65 year olds require pregnancy tests! Standard Deductions Over Age 65 Meanwhile, back on the real-world side of the IRS, the standard deduction for folks age 65 and older is $1,500 greater than it is for the rest of us. That is a benefit that may be more useful and widespread. You either itemize or take the standard deduction, but not both. Disability Benefits Over Age 65 We may be living longer, but not necessarily living longer in great health. If a person is permanently and totally disabled, up to 15% of the disability income could be a tax credit (as long as it's not greater than the tax burden). If you know of a person in this situation, perhaps a friend or relative, ask them to talk to their tax preparer about the credit for the elderly and permanently disabled. *These ideas are examples and do not constitute tax advice. Consult a qualified tax professional to obtain tax advice based on your specific situation.
Read the full newsletter and subscribe here.