Once you’ve put your day job behind you, and settled into the sweet life of retirement, it doesn’t mean tax time has come to an end. Likely, you’ll receive a Form SSA 1099, Social Security Benefit Statement (or RRB – 1099 if you are in Railroad Retirement). If you have additional income, your benefits may be taxable by up to 85%.
You may have a pension, annuity, or other retirement savings plan in which you receive income. If so, you will be issued a Form 1099-R, Distributions, and you should be aware of your taxation percentage on these benefits. They may be either fully or partially taxable, as it depends on your cost basis.
At the end of the tax year, you will want to take as many deductions as possible to reduce the amount of taxes you owe the IRS. If you are older than 65, or are blind, you are eligible for a higher standard deduction than other taxpayers. It’s still recommended that you itemize your deductions to determine if you get a greater benefit than the standard deduction, and then chose the option that gives you the highest amount.
If you itemize, you can deduct the following items:
- State or local excise taxes, applicable to property such as cars or boats
- Interest paid on investment properties
- Legal fees you paid for tax purposes
- Broker’s or bank fees paid for collection of bond interest or stock dividends
- Investors costs paid to manage your investment taxes
As a retiree, you may be able to deduct certain medical expenses if you itemize. These expenses can include:
- Medicare B premiums, as listed on Form SSA-1099
- Costs for long-term care services
- Nursing home, medical care facility or assisted living expenses
- Inpatient hospital stays
- Wages paid for nursing services, whether in-home or not
- Chiropractor charges
- Lab fees and x-ray charges
- Eyeglasses, hearing aids, dentures, or other prosthetics, including wigs used for medical hair loss
- Walkers and other medical supplies
- Dental care, excluding cosmetic dentistry services
- Maintenance for electric scooter or wheelchair
- Diabetes testing supplies
- Home improvements related to making the home accessible for a person with a disability
Sometimes, you may find comfort in volunteering during retirement. You aren’t able to deduct your time, but if you spend any of your own money on the volunteer activity and are not reimbursed, you may be able to deduct the expenses. The organization for which you volunteer must be qualified and recognized by the IRS. The rules for deducting volunteer trips that require you to be away from home are similar to a business trip. You’ll need documentation, such as receipts, to substantiate your expenses.
You may be eligible to claim the Credit for the Elderly or Disabled if you are 65 years of age or older at the end of the tax year. Generally, if you don’t have a qualifying child living with you for more than half of the year, you aren’t able to claim a refund based on the Earned Income Credit (EIC). Married taxpayers with only one spouse 65 or older may still qualify for the EIC even without children, if they file jointly.