Tax Preparation Tips for Seniors Based on the New Tax Cuts
With the new Tax Cuts and Jobs Act (TCJA), which was signed in 2017, many retirees and seniors may be questioning how this new law will impact their filing — and more importantly, their returns. With Tax Day rapidly approaching on April 15, Fellowship Square shares new information for filing in 2019 to help provide clarity for seniors as they prepare their taxes.
A recent article on U.S. News and World Report, advises seniors to work with a professional to ensure they are aware of all the changes the new TCJA will have on their filing process and ultimately, their return. The story also shares information about some of the biggest changes to the TCJA that impacts retirees and seniors.
First, it’s important to know that the standard deduction has increased —by nearly twice the amount of years passed. Seniors age 65 and older can make an additional deduction of $1,600, which the article states can be “more valuable than itemized deductions.”
State and local tax deductions have changed as well and vary by state — so seniors should be aware of the changes made in the state in which they file taxes. For example, now income and property taxes are included a taxpayer’s state and local tax deduction, which is limited to $10,000. This can impact seniors living in states with high property taxes.
A key change that can benefit seniors is that earned income can be placed into a Roth IRA to build tax-free savings. This is a good opportunity for retirees that have freelance jobs or are working as consultants.
The new tax law takes into account caregivers, allowing specific deductions for those that are single and caring for a family member. It is advised that caregivers speak to their tax professional, as each person’s situation is unique.
Another important portion of the TCJA for charitable seniors over the age of 70 and a half that need to take required minimum distributions is that they can donate these funds directly to charity. This can help mitigate income taxes on these required minimum distributions. The cap on the donation is $100,000.
Tax brackets have also been adjusted and reduced for 2018, so seniors should be aware of this and know what bracket they fall within — the 15 percent bracket has been reduced to 12 percent, the 25 percent bracket is now 22 percent and the 28 percent bracket is now 24 percent. The article suggests seniors should “limit withdrawals from taxable sources to keep you from being pushed into a higher tax bracket.”
Fellowship reminds seniors and their caretakers that tax filings should not cause added stress. With the number of programs and professionals available, it’s important to use these resources to make tax time a smooth, easy and simple process for seniors.