Published: January 30, 2023
Last week, the Internal Revenue Service officially kicked off the 2023 tax filing season, and Acting Commissioner Doug O’Donnell says more than 5,000 additional telephone assistors and in-person staff should help make filing easier.
There is other good news. File electronically and choose direct deposit and you should have your refund in 21 days. Plus, you have until April 18 to file. The not so good news - “Due to tax law changes such as the elimination of the Advance Child Tax Credit and no Recovery Rebate Credit this year to claim pandemic-related stimulus payments, many taxpayers may find their refunds somewhat lower this year,” the IRS explains.
Everyone’s tax situation is unique. So, it may be a good idea to work with a professional tax preparer. If you are in the market for one, the IRS has these 5 tips:
- Select a preparer who is available year-round;
- Check the Better Business Bureau for complaints and ratings;
- Be sure the preparer offers e-filing;
- Be wary of preparers who claim they can get you a larger refund than competitors;
- Never sign a blank or incomplete return.
Or maybe all the TV ads for tax return preparation software have convinced you to head in that direction. You can find recommendations online from several nonbiased reviewers, such as Forbes Advisor and BuySide from WSJ. Also, the IRS offers IRS Free File for taxpayers with an adjusted gross income of $73,000 or less, and the AARP Foundation Tax-Aide program provides in-person and virtual tax assistance to anyone free of charge, with a focus on taxpayers who are over 50 and have low to moderate income.
But if you are over 65 years of age and do your own taxes (kudos to you!), here are some tax breaks to explore. Read on…
Often overlooked tax breaks for older adults
Kiplinger recently put together a list of the most common tax breaks overlooked by older adults.
Did you know that when you turn 65 you are entitled to a larger standard deduction?
“For example, a single 64-year-old taxpayer can claim a standard deduction of $12,950 on his or her 2022 tax return (it will be $13,850 for 2023 returns). But a single 65-year-old taxpayer will get a $14,700 standard deduction in 2022 ($15,700 in 2023). If you’re married and one or both spouses are age 65 or older, you also get bigger standard deduction than taxpayers under age 65 do. If only one spouse is 65 or older, the extra amount for 2022 is $1,400 and $2,800 if both spouses are 65 or older,” Kiplinger explains.
Here are 3 other tax breaks to keep in mind.
- Generally, you must have earned income to contribute to an IRA, but if you're married and your spouse is still working, they can generally contribute up to $6,000 to a traditional or Roth IRA.
- If you become self-employed after you retire (for instance, become a consultant) you can deduct the premiums you pay for Medicare Part B and Part D, plus the cost of supplemental Medicare (medigap) policies or the cost of a Medicare Advantage plan;
- Once you reach age 70½, there's a tax-friendly way to make charitable donations even if you don't itemize. It's called a qualified charitable distribution (QCD), which allows you to transfer up to $100,000 each year from your traditional IRAs directly to charity.
Keep in mind these changes from 2020
The SECURE Act of 2020 changed the age when you must begin withdrawing and paying ordinary income tax on funds from your IRA. If you reach age 70 ½ in 2020 or later, you must take your first RMD by April 1 of the year after you reach 72.
Other IRA changes:
- The most that can be contributed to your traditional IRA is $7,000 for those 50+ (up from $6,500);
- Starting in tax year 2020 you can make IRA contributions as long as you have taxable compensation. Prior to 2020 you could not make IRA contributions after age 70 ½;
- For tax year 2020 there were no required minimum distributions from IRA’s or other qualified retirement plans such as 401k’s and 403b’s, but RMDs returned in 2021 and remain in effect for 2022.
The medical deduction remains at the 7.5% threshold for tax year 2022. Many older adults take advantage of this deduction because of increased health care costs and preventive measures to stay healthy.
Medical care deductions include:
- Diagnosis, cure, mitigation, treatment, or prevention of disease or for the purpose of affecting any structure or function of the body;
- Transportation primarily for and essential to medical care;
- Qualified long-term care services.
Prepaid medical costs may also be deducted. The IRS’s long-standing position is that the portion of the lump sum entry fee and the portion of the monthly fee attributable to medical care paid by continuing care retirement community residents is deductible as medical expenses. This can be significant for CCRC’s with type A, comprehensive contracts.
“Most Kendal at Oberlin residents receive a significant tax deduction for the medical component of the monthly fee. New residents receive an even greater tax deduction for the medical component of the entry fees they pay,” said Vance DeBouter, CPA in Oberlin.
Preparing for Tax Season?
Updated for the 2022 tax year,
Tax Relief for Older Adults: A Basic Guide to Benefits
In the past, Molly Kavanaugh frequently wrote about Kendal at Oberlin for the Cleveland Plain Dealer, where she was a reporter for 16 years. Now we are happy to have her writing for the Kendal at Oberlin Community.
About Kendal at Oberlin: Kendal is a nonprofit life plan community serving older adults in northeast Ohio. Located about one mile from Oberlin College and Conservatory, and about a 40 minute drive from downtown Cleveland, Kendal offers a vibrant resident-led lifestyle with access to music, art and lifelong learning.