9 Things for Older Adults to Remember at Tax Time

With Tax Day – April 15 – on its way, it is time to begin crossing t’s and dotting i’s in preparation for filing your taxes. As tax time in the United States draws near, ensure that you file all the proper forms and take all deductions to which you're entitled.

The following are nine things to keep in mind as you prepare your tax form.

1. Gifts

Have you given away any money this past year to family, friends, or charities? The gift tax can be confusing.

If you gave away more than $18,000 in 2024, you will have to file a Form 709, the gift tax return. This does not necessarily mean you will owe taxes on the money, however.

2. Medical Expenses

Many types of medical expenses are tax deductible, from hospital stays to hearing aids.

To claim the deduction, your medical expenses must be more than 7.5 percent of your adjusted gross income. This includes all out-of-pocket costs for prescriptions (including deductibles and co-pays) and Medicare Part B and Part C and Part D premiums. (Medicare Part B premiums are usually deducted out of your Social Security benefits, so be sure to check your 1099 for the amount.)

You can only deduct medical expenses you paid during the year, regardless of when the services were provided, and medical expenses are not deductible if they are reimbursable by insurance.

3. Parental Deduction

If you are caring for your mother or father, you may be able to claim your parent as a dependent on your income taxes. This would allow you to claim the $500 tax credit for any nonchild dependents.

4. Long-Term Care Insurance Premiums

Premiums for “qualified” long-term care policies are treated as an unreimbursed medical expense. Long-term care insurance premiums are deductible for the taxpayer, their spouse, and other dependents.

5. Social Security Benefits

Although Social Security benefits are generally not taxable, people with substantial income in addition to their Social Security may pay taxes on their benefits. If you file a federal tax return as an individual and your “combined income,” including one half of your Social Security benefits and nontaxable interest income is between $25,000 and $34,000, 50 percent of your Social Security benefits will be considered taxable. If your combined income is above $34,000, 85 percent of your Social Security benefits is subject to income tax.

6. Home Sale Exclusion

Married couples can exclude from income up to $500,000 in profit on the sale of a home ($250,000 for single individuals). If a surviving spouse sells the home, they can still claim the exclusion as long as the house was sold no more than two years after the spouse’s death.

7. Elderly or Disabled Tax Credit

Some low-income elderly or disabled individuals are entitled to a special tax credit, typically between $3,750 and $7,500. To be eligible, you must meet income limits. For more information on this tax credit, visit the IRS website.

8. Earned Income Tax Credit

Previously primarily available to people with young children, for 2021 working seniors without dependents may qualify for this important credit. To learn more about this tax credit, check out this related article.

9. Tax Refunds

Getting a federal tax refund should not affect your Medicaid or Social Security benefits. For a year after receiving a tax refund from the federal government, the refund will not be considered income or resources for Supplemental Security Income (SSI) or Medicaid purposes. You can also transfer the refund within a year without incurring a penalty.

The IRS’s Tax Counseling for the Elderly (TCE) Program offers free tax help to taxpayers who are 60 and older. The IRS also publishes a Tax Guide For Seniors.

If you are getting ready to prepare your taxes, you may also find the following articles helpful:

• Free IRS Support Services for Seniors
• Tax Break Helps Pay for Continuing Care Retirement Community Fees
• If You Are Raising Grandchildren, You May Qualify for This Tax Credit