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Message #687 Federal tax benefits for seniors

mp3 #687 Federal Tax Benefits for Persons Age 65 or Older (mp3 file)


The federal income tax laws give special preferential treatment for all taxpayers, including resident aliens, who are age 65 or older, and additional benefits are available if you qualify because of individual circumstances.

All taxpayers 65 or older, have benefits that fall under two general categories: first, a special gross income requirement: and the second is a more liberal standard deduction.

You are required to file a tax return if your gross income exceeds a certain amount. That amount is raised if you are 65 or older, and is even higher if you and your spouse are 65 or older. Your local Internal Revenue Service office can tell you the amount of gross income which is required for filing a tax form.

You may be forced to file a tax return even if your gross· income is lower than the normal gross income requirement, in certain circumstances. These circumstances include self-employment with a certain amount of net earnings, income from tips from which no social security tax was collected, and certain circumstances where you are the survivor, executor, administrator, or legal representative of a person who died during the year. Details of the procedures for filing under these circumstances need to be obtained from your local irs office.

The second category of special benefits involves a higher standard deduction. If you are 65 or older, you can get a higher standard deduction. The amount of your standard deduction depends on your income, and on how much social security you receive.

An additional deduction for blindness may be allowed to any taxpayer who is blind during the tax year, or blinded up to and including the last day of the tax year. Blindess, for the purpose of this exemption, is given a legal definition, which can be obtained from your local I.R.S. office. If your vision is no better than that which is legally defined, then attach a statement from a qualified physician or registered optometrist to your tax return. A person who is totally blind needs only a statement to that effect attached to his return.

While the tax benefits already mentioned apply to all taxpayers in this age group, you may be interested in other benefits given for individual circumstances. There are two basic types of benefits for individual circumstances, and these require that you file form 1040.

The first of these deals with the sale of your residence. If you were age 55 or older on the date you sold or exchanged your residence during the tax year, you may not need to include in your gross income the profit from that sale or exchange. But in order to be able to exclude part or all of that profit, during the five year period ending on the date of the sale or exchange, you must have owned and used the property as your main residence for a total of 3 years. You are eligible for this exemption provided you or your spouse has not used this exemption at any time in the past. In other words, you take this benefit only once in your lifetime. The maximum amount of the federal exemption is $125,000. Your local I.R.S. office will tell you more about the information required and forms to be submitted.

Another individual circumstance which could qualify you for benefits deals with the retirement income credit. If you have retired on permanent disability or are age 65 or older, you may be entitled to a credit against your tax. The credit is primarily for the benefit of taxpayers who receive moderate amounts of social security, pension, annuity and/or disability benefits. The amount will be determined by your income, age and filing status. Retirement income generally includes dividends, interest, pension and annuities. If both you and your spouse qualify, you may each claim the credit. You may use the standard deduction or a tax table, and still claim this credit.

However, if you do not claim benefits from sale of residence or retirement income, and if you do not itemize deductions or make adjustments for business related expenses, then you may be able to file your return by using the short form 1040a. To file the short form, all of your income must be from salaries and wages, dividends, interest, IRA distributions, pensions, unemployment compensation, and social security benefits that are taxable because of your total income.

The Internal Revenue Service will compute your tax for you if your income was less than a certain amount and you claim standard deduction.

Additionally, all taxpayers regardless of age may be required to estimate their tax payments where they have income from sources that do not involve any withholding tax. This is especially important to persons 65 and over because most of their income involves no withholding, such as pensions, annuities, rental income, interest, dividends and self-employment income.

If you have this type of income, you may request withholding by your employer, on annuity or pension programs.

Taxpayers 65 or older should refer to I.R.S. publication #554 entitled "Older Americans’ Tax Guide" and I.R.S. Publication #524, "Credit for the Elderly or Disabled," which applies to anyone receiving retirement income. These publications are available free by writing or calling your local Internal Revenue Service office or by going to www.irs.gov. These pamphlets also include basic tax information in areas of special interest to the large number of taxpayers age 65 or older filing state income tax returns. Information about your state tax can be obtained at your nearest franchise tax board office.

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