In 2024, you need to file your 2023 taxes and plan for upcoming years. As a taxpayer, the goal should always be to pay as little as possible, which can be especially important to retirees. Taxes have a significant impact on your finances.
Since tax rules are subject to change from one year to the next, it can be difficult for retirees to track these changes and ensure they receive the correct deductions on their returns. Fortunately, you can use this helpful guide to learn about key points of the 2024 tax plan for retirees and those who are about to retire.
The 2024 Tax Plan
Each year, you have to choose whether to file a standard deduction or an itemized deduction. Before you file your tax return, it’s important to know the difference between these two deductions, and which will likely benefit you the most.
You can take a standard deduction or itemized deduction on your tax return, but you cannot take both. The standard deduction is a fixed, no-questions-asked deduction that reduces the amount of income you’ll need to pay taxes on.
Unfortunately, while standard deductions are common, you won’t be able to claim any additional deductions or credits you might qualify for, such as deductions for home mortgage interest, charitable expenses, donations, and so on.
With an itemized deduction, you can claim each eligible expense that you have paid in an effort to reduce your taxable income. Therefore, an itemized deduction might be the right option if you have more expenses than the total standard deduction. You’ll need to keep records and receipts of those expenses, as you’ll incur a higher risk of an audit.
The standard deduction increased in 2024. As part of the current tax plan, you may claim the standard deduction in the following amounts, based on your filing status:
- Single (Younger Than 65): $14,600
- Single (65+): $16,550
- Head of Household (Younger Than 65): $21,900
- Head of Household (65+): $23,850
- Married Filing Separately (Younger Than 65): $14,600
- Married Filing Separately (65+): $16,150
- Married Filing Jointly (Younger Than 65): $29,200
- Married Filing Jointly (65+): $30,750
You may also qualify for a larger standard deduction if you are legally blind or you’ve suffered a loss in a federally declared disaster.
Changes to Medical and Dental Expense Deductions in 2024
Some of your medical and dental expenses may qualify as part of your deduction if you choose to take an itemized deduction. These deductions can cover expenses that you paid for yourself, your dependents, and your spouse.
There are several types of medical and dental expenses you can claim, including the following:
- Expenses you paid to psychologists, psychiatrists, doctors, surgeons, dentists, chiropractors, and non-traditional practitioners
- Expenses for residential nursing home care or inpatient hospital care
- Payments made to treatment centers for drug or alcohol addiction, smoking-cessation programs
- Expenses toward acupuncture treatments
- Payments for prescription drugs or insulin
- Weight-loss program costs for a specific diagnosed disease, including obesity
- False teeth, prescription eyeglasses, contact lenses, crutches, wheelchairs, or hearing aid costs
- Payments for a service animal or guide dog if you are visually impaired, hearing disabled, or have another qualifying disability
Additionally, expenses related to a nursing facility can be claimed for you, your spouse, or your dependents. These expenses may include medical care and lodging and meal costs. However, if you, your spouse, or your dependent is primarily living at home, only the cost of medical care can be deducted.
There are certain medical expenses that you cannot claim in your itemized deduction, including the following:
- Funeral or burial expenses
- Non-prescription medications
- Toothpaste, mouthwash, and toiletries
- Cosmetics, including cosmetic surgery
- Trips and programs for the general betterment of your health
Charitable Distributions During Retirement
Do you regularly donate to charity? Depending on how you choose to donate, you may qualify for charitable donation deduction.
One of the best ways to donate to charity as a senior retiree is to donate with funds from your Individual Retirement Account (IRA). Normally, your IRA funds are taxed just like most other sources of income. However, if you are at least 72 years old, these funds can be donated to charity without paying taxes on them. Note that you will not be able to claim these donations on your itemized deduction for most medical research organizations, nonprofits, educational organizations, or churches.
If you would like to provide a charitable donation and claim that donation on your itemized deduction, your contribution must meet the following criteria:
- Made to a qualifying organization
- A cash contribution
Normally, you can donate up to 100% of your adjusted gross income. However, the IRS has currently suspended these limits due to the COVID-19 pandemic.
Additionally, you can contribute food for the needy, those who are ill, and infants. However, the amount of your contributions that you can deduct on an itemized return is generally capped at up to 50% of your adjusted gross income. However, limits of 20 to 30% may be applied in some cases.
The Bottom Line
Tax season can be a stressful time for all taxpayers. However, taking the time to plan ahead can alleviate some of that stress and help you get the highest deduction possible. This is especially important if you intend to file an itemized deduction return, as you will need to hold onto any records pertaining to your qualifying expenses. Should you fail to keep those records, you will not be able to claim them on your tax return, and you could find yourself in trouble with the IRS if you do so anyway. While most retirees do not face more expenses than the standard deduction, each taxpayer’s finances and expenses are different, so you should always review your options. Additionally, you may consider filing your tax return with a professional to ensure that you receive all of the deductions and credits you may qualify for.
Related Article: Taxes and Retiring Abroad
By Admin –
