Experts warn that many older Americans aren’t taking advantage of tax credits that can help boost their retirement savings.
Tom Wheelwright, a certified public accountant, said the sweeping changes introduced by the Internal Revenue Service (IRS) over the past few years may be confusing some taxpayers.
Trump administration-era legislation introduced in the Tax Cuts and Jobs Act of 2017 brought major changes to the tax landscape. And in 2022, President Biden made further amendments under the Inflation Control Act.
These laws introduced new tax breaks and changed existing regulations.
Here’s a look at some lesser-known tax credits that have proven beneficial for seniors. These can add up to hundreds, thousands of dollars, and even tens of thousands of dollars for wealthy seniors.
![Tom Wheelwright, a certified public accountant, said major changes introduced by the Internal Revenue Service (IRS) over the past few years may be confusing some taxpayers.](https://i.dailymail.co.uk/1s/2023/12/05/15/78568671-12823811-Major_changes_put_in_place_by_the_Internal_Revenue_Service_IRS_o-a-24_1701788938846.jpg)
Tom Wheelwright, a certified public accountant, said major changes introduced by the Internal Revenue Service (IRS) over the past few years may be confusing some taxpayers.
donate to charity
Wheelwright, founder and CEO of WealthAbility, says donating stocks or cryptocurrencies that have appreciated in value to charity can be a good way for seniors to maximize tax benefits. He said it is possible.
“You don’t have to pay tax on capital gains because you get both deductions,” he told DailyMail.com.
Many people also overlook charitable giving, which has tax benefits beyond the basic deduction, he said.
“There are many donations that can be tax deductible with or in lieu of a deduction,” Wheelwright said.
Tax credits directly reduce the amount of taxes you owe, reducing your tax liability dollar for dollar. Tax credits, on the other hand, reduce the amount of your income that is taxed.
“There are a lot of small donations that impact state taxes, but they can also impact federal taxes,” Wheelwright said.
Credits offered vary by state, so be sure to check what’s available where you live, he said.
“For example, in Arizona, gifts of $1,000 or more on a joint return for gifts to foster care charities, $800 or more for gifts to other qualified charities, and gifts to qualified school tuition programs for gifts of $1,000 or more on a joint return. Tax credits of more than $1,300 are allowed.”
Wheelwright added that if you don’t itemize your federal tax return, you won’t get a deduction for donations to charity, so it’s worth considering if the credit is available in your state.
![Donating appreciated stocks and cryptocurrencies to charity can be a good way for seniors to maximize tax benefits.](https://i.dailymail.co.uk/1s/2023/12/08/21/78077039-12823811-Donating_stock_or_even_cryptocurrency_that_has_gone_up_in_value_-a-1_1702071013309.jpg)
Donating appreciated stocks and cryptocurrencies to charity can be a good way for seniors to maximize tax benefits.
qualified charitable distribution
Once Americans reach a certain age, they must begin taking annual withdrawals from their retirement plans, known as required minimum distributions (RMDs).
The Secure 2.0 Act, which went into effect this year, raised the age at which contributions can begin to 73.
If you’re 73 or older, you may want to consider a qualified charitable distribution (QCD), Wheelwright said.
Because this is a contribution that can be made directly from your IRA account, you can avoid taxes on withdrawals and reduce the amount of RMDs you need to take.
“But if you’re not old enough to have to make an RMD, that doesn’t really help you,” Wheelwright says.
“In that case, it would be better to donate highly valued stocks or highly valued cryptocurrencies.”
Excess basic deduction
Many taxpayers will claim the standard deduction to reduce their income by a preset amount in 2023: $13,850 for single filers and $27,700 for married joint filers.
If the amount is larger than the item of expenditure, it is reasonable to take the basic deduction.
And for the 2023 tax year, Americans who are 65 or older or visually impaired and meet certain criteria will standard Those eligible as outlined by the IRS can now take the additional standard deduction.
The additional standard deduction is $1,850 for single filers or those filing as heads of households and $3,000 for married couples filing jointly if each spouse is 65 or older, for a total of $15,700 for single filers. $30,700 for a married couple.
Medicare premium deduction
“If you’re self-employed, your Medicare premiums are fully deductible without having to itemize them,” Wheelwright says.
Medicare premiums are insurance premiums and are subject to the self-employed health insurance deduction, he added.
Wheelwright advises self-employed seniors to talk to a professional about their taxes.
“People who are self-employed or run a business should consult a tax professional. They should not try to do this themselves,” he said.
Spousal Contributions to IRA
Experts say many Americans don’t know that married couples can contribute earned income to a low-income or non-working spouse’s IRA account if they file a joint tax return.
This works like a traditional IRA, which reduces your pre-tax income, but does not work with a Roth IRA, where the money is paid out after taxes.
“This spousal IRA strategy allows couples to double their retirement savings for the year while reducing their tax burden,” says Nathan Anderson, a certified financial planner with Prairiewood Wealth Management. he said. wall street journal.
For the 2023 tax year, married couples filing jointly can contribute $6,500 per individual to a spousal IRA, for a total of $13,000.
Additionally, if both individuals are 50 years of age or older, each individual is allowed to contribute an additional $1,000 for a total of $15,000.
The IRS has specific rules about who can take advantage of this, including that working spouses must have an income that is at least equal to the amount contributed to both spouses’ IRAs.