There are many benefits that come with age – wisdom, experience, stories to tell, and, maybe less commonly known, many tax benefits. If you are 65 and older, what are some tax perks you should be taking advantage of? 

EITC Benefits

Working grandparents that are raising grandchildren should be aware of the Earned Income Tax Credit (EITC) and claim it correctly – if they qualify. 

The EITC is a federal income tax credit for workers who don’t earn a high income ($53,505 or less for 2016) and meet certain requirements, like being aged 25-65 years of age. Because it’s a refundable credit, those who qualify and claim the credit could pay less federal tax, pay no tax or even get a tax refund. The EITC could put an extra up to $6,269 into a taxpayer’s pocket.
Grandparents and other relatives care for millions of children, but often do not know that they could claim the children under their care for the EITC. A grandparent who is working and has a grandchild who is a qualifying child living with him or her may qualify for the EITC, even if the grandparent is 65 years of age or older. Generally, to be a qualified child for EITC purposes, the grandchild must meet the dependency requirements. Special rules and restrictions apply if the child’s parents or other family members also qualify for the EITC, found on
To qualify for EITC, the taxpayer must have earned income either from a job or from self-employment and meet basic rules. Also, certain disability payments may qualify as earned income for EITC purposes. EITC eligibility also depends on family size.

Higher Deduction

If you are age 65 or older on the last day of the year and do not itemize deductions, you are en-titled to a higher standard deduction. If you are Single and 65 or older, you get a standard deduction of $7.850, which is $1,550 more than those under age 65. If you are married, you get an additional $1,250 standard deduction. This additional amount is shown on Form 1040, Line 40.

Contributions to Your Retirement

Even if you are retired or semi-retired, this does not preclude you from making tax-deductible contributions to your retirement accounts, like IRAs and 401(k)s. This is perhaps one of the best senior tax perks available, as you may need to live off of your retirement funds. The tax laws are written in such a way that people over 50 have higher limits on what they can contribute to retirement accounts, as opposed to those under 50. 

In addition to contributions to IRA accounts, you can also make contributions to Roth IRA accounts. Although you will pay taxes on the money you contribute to such an account, you will not pay taxes on money that you withdraw from it. This means that any interest that the money gains during its time in the Roth IRA account is tax-free.

Charitable Contributions 

When in the golden years, a lot of seniors are in better position to donate or give back. How exactly can you deduct these contributions? Charitable contributions are deductible as an itemized deduction. However, there are limits on these deductions. Cash contributions that are charitable in nature can only be deducted up to an amount equal to 50% of your AGI. In addition, if you donate property to a charitable organization, you can generally deduct the fair market value of the property. If you make a contribution of a piece of property that the charitable organization will likely sell off, then your deduction is limited by the gross proceeds from the sale of the item. This rule applies if the claimed value of the donation is more than $500.

These perks can help ease the stress of tax season. If you have any questions about them, be sure to reach out to Gold Standard Tax and we would be happy to clarify anything for you. 

Save some gold in the golden years.