They say that with age comes wisdom. But with age also come a few tax perks.
Once your birthday cake has 50 candles on it, the IRS starts to lighten up a bit. And when you hit 65, the IRS has a few more small presents for you — if you know where to look. Here are five tax deductions and credits you don’t want to miss after you’ve blown out all those candles.
1. A higher standard deduction
If you take the standard deduction instead of itemizing (learn how to decide here), you’ll be able to deduct the amounts in the table below. But the standard deduction is $1,300 higher for those who are over 65 or blind. It’s $1,600 higher if also unmarried and not a surviving spouse.
|Filing status||2018 tax year||2017 tax year|
|Married, filing jointly||$24,000||$12,700|
|Married, filing separately||$12,000||$6,350|
|Head of household||$18,000||$9,350|
2. More room to shelter income
Because contributions to a 401(k) are tax-advantaged, the IRS limits how much you can contribute each year. For folks under 50, that limit is $18,500. If you’re over 50, though, you can put in $24,500 per year.
But alas, that assumes that you’re still working and that your employer offers a 401(k) plan.
If you’ve already kissed your cubicle goodbye, you may still be able to contribute an extra $1,000 a year to a traditional IRA or a Roth IRA, if you qualify for a Roth. That’s thanks to the IRS’ catch-up provision for people 50 and older. And remember, you can put money into a traditional IRA until the year you reach age 70½; there’s no age limit on Roth IRA contributions.
» MORE: Traditional IRAs vs. Roth IRAs
3. The deduction for medical expenses
If you itemize, you can deduct unreimbursed medical expenses — but only the amount that exceeds 7.5% of your adjusted gross income. For example, if your adjusted gross income is $40,000, the threshold is $3,000, meaning that if you rang up $10,000 in medical bills, you may be able to deduct $7,000 of it.
And if you’ve recently purchased long-term care insurance, you may be able to add in $410 to $5,110 of the premiums, depending on your age (the older you are, the more you can deduct).
4. A safety net for selling that empty nest
This tax deduction is available to everyone regardless of age, but it’s especially useful if you’re itching to sell your house and downsize in retirement. The IRS lets you exclude from your income up to $250,000 of capital gains on the sale of your house. That’s if you’re single; the exclusion rises to $500,000 if you’re married.
So, if you bought that four-bedroom ranch house back in 1984 for $100,000 and sold it for $350,000 today, you likely won’t have to share any of that gain with Uncle Sam. There are a few conditions, though:
- The house has to have been your primary residence.
- You must have owned it for at least two years.
- You have to have lived in the house for two of the five years before the sale, although the period of occupancy doesn’t have to be consecutive. (People who are disabled, and people in the military, Foreign Service or intelligence community can get a break on this, though; see IRS Publication 523 for details.)
- You haven’t excluded a capital gain from a home sale in the past two years.
- You didn’t buy the house through a like-kind exchange (basically swapping one investment property for another, also known as a 1031 exchange) in the past five years.
- You aren’t subject to expatriate tax.
5. More help if you’re disabled
But be prepared for this one to give you a few gray hairs. First, few people qualify for the credit; most of the time, your Social Security benefits will cause you to exceed the income limits. Plus, the tax credit is nonrefundable, which means that if you owe $250 in taxes but qualify for a $5,000 credit, for example, you won’t get a check from the IRS for $4,750. But at least you’ll get to enjoy a $0 tax bill.