RISMEDIA, Dec. 31, 2008-As the end of a challenging financial year comes to a close, many senior citizens are searching for new ways to save money during their retirement. Retirement expert Eric Bachman and Certified Public Accountant Jeanne Duhe share six year-end tax tips that are simple yet intelligent ways for senior citizens to save money on their 2008 taxes.
1. Take a Senior Citizen Deduction
The IRS allows those age 65 and over to take an additional deduction worth $1,350 for single filers or $2,100 for a married couple. This also applies to individuals who do not itemize their deductions because it is added to their standard deduction.
2. Claim Stock Losses Now
Those seniors with stock losses should consider taking them before year-end. Losses are used to offset any stock gains, including gain distributions from mutual funds. In addition to offsetting gains, seniors can claim up to $3,000 in losses per year to effectively reduce taxable income for 2008. Any losses in excess of that amount are carried forward to future returns.
3. Seniors Seeking Cash Should Consider a Reverse Mortgage
Income earned from a reverse mortgage is tax free, meaning that seniors in need of cash can unlock the equity in their homes as a lump sum payment in 2008 with no tax implications. A reverse mortgage remains a viable financial tool for those 62 and older because it does not take into account credit history or a borrower’s current financial situation.
4. Pay Outstanding Medical Bills Now
An individual with either a low taxable income or large medical expenses should consider paying all outstanding medical bills before the end of the year as an additional deduction. This would include supplemental health insurance, doctor bills, hospital bills and prescription drugs. Eligible deductions also include medical mileage, the number of miles traveled to and from the doctor, pharmacy, or hospital.
5. Be Aware of Social Security Income Threshold
Those senior citizens who continue to work while drawing social security should be aware of mandated income thresholds. If income exceeds $25,000 for one person or $32,000 for a married couple, then social security begins to be counted as taxable income. This can be a large burden on senior citizens. If a senior is close to these income limits, they should consider pushing some income into next year to protect all of their social security from income taxes.
6. Understand IRS Rules for IRAs
The IRS requires taxpayers to begin withdrawing funds from their IRA’s in the year after the year they turn 70 and one half. In most cases, seniors should begin withdrawals in the year they turn 70 and one half. By waiting until the following year, seniors would be required to make two withdrawals, potentially entering them into a higher tax bracket.
“Senior citizens are being squeezed like never before and need to take advantage of any savings available to them,” said Eric Bachman, founder and CEO of Golden Gateway Financial, a comprehensive online financial resource for seniors and retirees. “With a few savvy moves, senior citizens can save themselves hundreds and even thousands of dollars in income taxes.”
“Older Americans need to be aware of the benefits made available to them by the IRS,” said Duhe, a certified public account and principal of Jeanne S. Duhe, LLC. “These are effective ways to save money in order to extend existing budgets even further.”
For more information, visit www.goldengateway.com.