ANS -- 10 Tax Tips Everyone Over 50 Should Know

This is from AARP, sent to me by one of our readers.


Find it here:  http://www.aarp.org/money/taxes/info-02-2012/tax-tips-you-should-know.print.html  
--Kim





Bulletin

10 Tax Tips Everyone Over 50 Should Know

Double check that you are taking advantage of every deduction and credit available to you

by: Carole Fleck | from: AARP Bulletin | February 8, 2012

With the 2012 tax filing season underway, Americans are scrambling to find every deduction or credit available to them. Here are 10 time-tested but little-known steps that older taxpayers may be able to use to slash the bottom line of their returns.

See also: Sign up for the AARP Money Newsletter.

Some of these steps are complex and require that you itemize your return, rather than take the standard deduction. And some types of deductions are claimable only in the amount that exceeds 7.5 percent of your adjusted gross income. Other restrictions may apply as well.

So consult with a tax adviser or with tax preparation software about whether they can be put to work for you. Be sure you understand how they work. And always save the documentation of the expenses in case the IRS ever wants to see it.


Get the most out of your income tax return. ­ Getty Images

1. Claim a portion of long-term care insurance premiums ­ the older you are, the higher the claimable ceiling. Here's the scale for the current filing year: Age 40 or under ­ the maximum claimable amount is $340; 41 to 50 ­ $640; 51 to 60 ­ $1,270; 61 to 70 ­ $3,390; 71 or over ­ $4,240.

Small business adviser Barbara Weltman, who hosts a weekly radio show and publishes a newsletter, notes that some states including New York also give tax breaks for these premiums.

2. Deduct the room and board costs of an assisted living facility if the resident is there mainly for medical purposes and is getting staff assistance to perform normal activities of daily living, such as bathing and dressing, or has cognitive impairment to the point of requiring supervision. The services are deductable too. They must be part of a plan of care prescribed by a licensed health care provider for a chronically ill person.

3. Deduct legal fees for retirement tax planning and medical expenses for things such as hearing aids and batteries, artificial teeth and prescription drugs, says Mark Steber, chief tax officer for Jackson Hewitt. Other claimable medical expenses: fertility treatments, oxygen, vasectomies and wheelchairs.

More Tax Tips

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Be aware, though, that some expenses you might think are claimable in fact are not. They include hair transplants, maternity clothes and teeth whitening. Also not claimable: costs for any kind of illegal operation or treatment.

4. Do you work while paying a home health aide to take care of your spouse or dependent? You may be able to claim a credit of up to $3,000 in dependant (or spouse) care expenses. That credit is shaved directly off your bottom-line tax bill; it is not a deduction from your taxable income.

5. If you contributed after-tax income to your retirement account, a percentage of your annual distribution may be tax-free. The logic for this is that if you already paid taxes on money before you put it into the account, it shouldn't be taxed again when it comes out. But tax rules are never simple: You will have to pay taxes on any earnings that those after-tax contributions generated while in the account.

Next: Can you deduct your parents' medical bills? >>

6. If your adjusted gross income, untaxed interest and half your Social Security benefit add up to less than $25,000 ($32,000 if married and filing jointly or qualifying widow), you'll pay no taxes on your Social Security income.

After that level, a sliding scale kicks in. But you can take a little bit of comfort in knowing that no matter how much you make, 15 percent of your Social Security benefits will remain forever untaxable.

More Tax Tips

• Join AARP today and receive access to exclusive information, benefits and discounts.
• Who pays estimated tax? Read
• 10 tax tips for taxpayers who owe money to the IRS. Read
• Take the Tax Smarts quiz. Do

7. If you're in a tax bracket of 15 percent or lower, you'll pay no federal taxes on long-term capital gains you racked up during the year. Long-term means that you held the asset for more than a year before selling it.

For the 2011 tax year, you're in the 15 percent bracket if your filing status is single and you have taxable income of more than $8,500 but not more than $34,500. If you're married and filing jointly or are a qualifying widow or widower, the range is more than $17,000 but not over $69,000.

8. If you turned 65 by Jan 1, 2012, you're eligible to take a higher than normal standard deduction: Single $7,250; married filing jointly $12,750 for one spouse 65 or older, $13,900 for two; married filing separately $6,950 for one spouse 65 or older, $8,100 for two; head of household $9,950. But be aware that if you take a bulked-up standard deduction, you're not allowed to itemize deductions. Do the math and figure out which way is best for you.

9. If you pay all or some of your parents' medical bills, you can deduct those as health care expenses. "Even if the parent doesn't qualify as your dependent" because of income rules, Weltman says. "If you pay for a parent's medical care and these payments are more than half of the parent's support, those payments are treated as part of the taxpayer's itemized medical costs."

10. You may get a tax credit if you made certain energy-efficient improvements to your home, such as installing a new roof or new windows or exterior doors. Credits may also be available if you purchased a qualifying furnace, electric heat pump, water heater or central air conditioning unit.

Carole Fleck is a senior editor at AARP.org.

Also of interest: Find an AARP Foundation Tax-Aide location near you.

An earlier version of this article contained incorrect information in item number eight concerning the standard deduction for a married person age 65 or older. The information has now been corrected.