Senior Living

What seniors need to know about taxes

Apr 1, 2020

By Al Brandenburg

Well, here we go again. Another year, another round of trying to keep the IRS from getting the best of you.

The deadline for filing your federal tax return is still a couple of weeks away, but there are plenty of reasons to start your taxes well before April 15. If you’re owed a refund – most taxpayers are – you’ll get your money that much sooner.

Filing early will also reduce the risk that a crook will hijack your refund, because a refund already claimed can’t be stolen. And even if you end up owing the IRS, it’s better to know that now, when you have time to come up with the money, than at 11 p.m. on April 14.

But perhaps the most compelling reason to start now is that filing early will give you enough time to claim all the tax breaks available to you. The Tax Cuts and Jobs Act, now in its second year, nearly doubled the standard deduction, which for 2019 is $12,200 for single taxpayers and $24,400 for married couples who file jointly. Only about 10% of taxpayers will continue to itemize.

Congress has recently enacted a bevy of tax credits and deductions for non-itemizers (Yay!). Overlook them and you could end up paying more to the IRS than you should (Boo!).

Homeowners who have a large mortgage are still good candidates for itemizing. For loans acquired after Dec. 15, 2017, you can deduct interest on a mortgage (or mortgages) of up to $750,000. For loans taken out before that date, you can deduct interest on mortgage debt of up to $1 million.

If you had extraordinary medical costs last year, deducting your unreimbursed expenses could push you into the itemizing pool. However, you’ll only be allowed to deduct a portion of those expenses. For 2019, you can deduct unreimbursed medical expenses that exceed 7.5% of your “adjusted gross income.” If your AGI was $50,000, for example, you would only be allowed to deduct the unreimbursed medical expenses that exceeded $3,750.

The list of eligible expenses is long, ranging from long term care to health insurance copayments to prescription drugs. And if any costs for dental and vision care aren’t covered by your insurance, those expenses are also deductible.

If you’re retired, as most of us are, it’s even more important to start your tax return early. While you’ll probably claim the standard deduction, you could be in for some unpleasant surprises, particularly if you’re a new retiree. The money you’ve scrupulously saved in your 401(k) or traditional IRA will be taxed when you make withdrawals. A portion of your Social Security benefits may also be taxable. That means it’s critical to take advantage of all the tax breaks available to you.

(Sources: AARP, US Federal Tax Code, Kiplinger’s)

Al Brandenburg is director of Maricopa Senior Coalition. He is a master gardener and has a master’s degree from Binghamton University School of Management.

This column appears in the April issue of InMaricopa.