People over 65 are not exempt from filing federal income tax returns unless their income is very low. Married couples must have income below $25,000, not counting Social Security benefits, to avoid having to file a tax return. The minimum threshold is $12,500 for a single person over 65. There are special exceptions for those who are blind or disabled, and all taxpayers over 65 qualify for a higher deduction.
The Internal Revenue Service standard deduction for married couples filing joint tax returns is $12,750. However, it increases to $13,900 for couples over 65. A qualifying widow or widower also is entitled to the larger standard deduction. The over-65 standard deduction for single filers is $7,250, compared with $5,800 for those under 65.
How to Deduct
That standard deduction will be applied automatically for those who file Form 1040-EZ but is subtracted from adjusted gross income on Forms 1040 and 1040A. It applies only to single or joint returns. If for some reason one spouse files separately and itemizes deductions, the other spouse cannot claim the over-65 standard deduction.
Taxable Social Security
Social Security benefits are not taxable if they are the only retirement income for taxpayers over 65. Those benefits may be taxable if an over-65 couple's adjusted gross income is above $32,000. The limit is $25,000 for single filers, married filing jointly or qualifying widow or widower. Couples with incomes between $32,000 and $44,000 may be taxed on up to half of Social Security; those with incomes above $44,000, up to 85 percent.
Taxpayers over 65 can itemize deductions on Form 1040, to include such things as mortgage insurance, charitable contributions and medical expenses, including long-term care and nursing services, above 7.5 percent of adjusted gross income (rising to 10 percent in 2013). Medical expenses include payments to Medicare and such things as household improvements required for care.
Pensions and retirement payments other than Social Security are subject to income taxes if they were deducted from taxable income when they were contributed. Withdrawals from individual retirement accounts and 401(k) or similar employer-supported plans are required starting at age 70 1/2. The IRS calculates these minimum withdrawals based on the amount in the plan and life expectancy of the account holder.
The special exceptions for elderly or disabled are limited to those couples with gross incomes under $25,000, where both are either over 65 and disabled and have non-taxable Social Security under $7,500. The limits where only one spouse qualifies are $20,000 and $5,000. The amount must be calculated for each return on a Schedule R for Form 1040 or 1040A.
The IRS offers several services for elderly taxpayers. Publications 524, credit for the elderly, and 554, tax guide for seniors, explain all the regulations. The Volunteer Income Tax Assistance and the Tax Counseling for the Elderly programs provide free assistance in preparing returns. VITA is limited to taxpayers with incomes under $60,000, while TCE specializes in questions on pensions and retirement issues.
- Jupiterimages/BananaStock/Getty Images