8 Ways Retirees Can Lower Their Taxes
Retirees must be given choices on to how use their personal pensions/money. There are government suggestions on how they could lessen the deduction of pensions due to high taxes. As contributors to the society’s high regular income, we should know or learn how to keep money on savings than spending it unwisely (for cash savings). An idea for cost cutting in all expenditures but focusing on essentials, mortgages or rentals, labor costs, and we should also be keen on where the economy is leaning to know where to be guided and investment. Here are ways that retirees can lower their taxes:
1. Increase your standard deduction
Retirees over 65 years old have bigger chances of a more standard amount deduction than those lower their age. If they are married and have spouse and children, they could include this to avail a bigger deduction on their taxes.
2. Deduct your Medicare premiums
We should be encouraged to buy low priced but government approved medicines and it is up to us to deduct medical expenses such as medical premiums. Some retirees started a business or find ways to earn money because it qualifies for more tax deductions. Every dollar counts if we are living on a fixed income including the money we spend on medicinal expenses and Medicare premiums.
3. Keep contributing to an IRA
We can make IRA contributions after we retire, but only if we can the level of amount of our earned income. You can get discounts on your payouts if you have a higher contribution. If we have our own businesses, we can funnel up to $61,000 of our earnings into an SEP IRA. The same with working again to another employer and your age is 50 years old or more, you can contribute up to $7,000 to a traditional or ROTH IRA.
4. Leverage catch-up contributions
We can say that many people gained their earning years in their middle age which allows them to significantly reduce their taxes and increase their savings. If you have 401(k), the ages of 50 and above would to entitle you to add $6,500 to your 401(k) bringing your total maximum contribution to $27,000.
5. Take the saver’s credit
If you patronize contributions to your retirement accounts, be sure to use the saver’s credit card. This would allow you to make certain or some deductions on your taxes and you can receive a portion of the payout depending on your income and the amount of your savings. The maximum credit amount is $1,000 for single filers and $2,000 for married.
6. Reduce what you pay in capital gains taxes
A lower capital gains more tax rate may promote greater investment by lowering the disincentive to do so, which could boost economic growth. In order to reduce what we pay in capital gain taxes, we should hold on to our investments for more than a year so that they qualify for a long-term capital gain rates. If we have mind of a business man, we should have basic idea to of taking advantage of the home sale exclusion and the usage of capital losses to offset capital gains. We may lessen the impact of capital gain tax and retain more investment proceeds in our pocket by being aware of how capital gains are taxed, and utilizing a few tax-saving measures.
7. Contribute more to your HSA
Retirees should consider looking the pros of having an HSA. By routing funds they can use for medicinal purposes or expenses through an HSA which receives contribution tax-free, they can reduce their tax burden. One good benefit if your age is at least 55 year old by the end of the tax year, you can increase your health savings account (HSA) contributions by an extra $1,000.
8. Claim the Credit for the Elderly or the Disabled
Being and elderly or a person with disability also has an advantage because they can minimize the tax that individuals with physical and mental disabilities and only the family that provides for them may be required to pay. They are also granted with the exemption on the purchase of certain goods and services from all establishments for their exclusive use assigning any category of enjoyment and availment. You can claim this credit if you age 65 years old or older by the end of the tax year. And if your age is under 65, you need to be retired and total disability to receive taxable disability income.
