Do Seniors Have To File Taxes?
One of the many benefits of reaching the age of 65 in the United States is that you begin to receive retirement benefits from the Social Security Agency (SSA), and while some senior citizens are exempt from the requirement to complete their taxes annually, reaching this age milestone does not necessarily mean that you are exempt from filing a tax return like other adults.
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Key Takeaways:
- Seniors who are above the age of 65 and whose only income is from Social Security payments are not required to file a federal income tax return as this is not considered taxable income.
- Unmarried seniors who are above the age of 65 must file a federal income tax return if their gross income exceeds $14,250, not including the payments they receive from Social Security income. Married seniors who are both above the age of 65 and file jointly are required to file taxes if their combined gross income exceeds $28,700.
- Married spouses above the age of 65 who file separately and lived together for any time during the previous year may be required to include 85% of their Social Security distributions as part of their taxable income.
- Some of the tax benefits for seniors include qualified charitable distributions, credit for the elderly and disabled, property-related tax breaks, the lack of an early withdrawal penalty, additional IRA deduction savings, the free Tax Counseling for the Elderly program, catch-up 401k contributions, a higher standard deduction, a higher income threshold for tax filing, and a higher HSA contribution limit.
- Beginning in January of 2023, approximately 70 million Americans will experience an increase in Social Security and Supplemental Security Income (SSI) benefits by 8.7% to account for the cost-of-living adjustment (COLA).
Do Seniors Have To File Taxes?
Senior citizens whose income solely consists of Social Security income are not required to file an income tax return during the tax season. However, if they have other sources of income that result in them earning above a certain threshold, they will still be required to file a tax return and pay taxes on that income.
Taxable Income Thresholds For Seniors
Seniors Who Are Unmarried
Seniors who are above the age of 65 and are unmarried are required to file a federal income tax return if their gross income, not including Social Security payments, exceeds $14,250. For the purposes of filing taxes, if an individual’s income aside from Social Security is less than $14,250, this gross income equals zero, and they will not be required to file a tax return.
Seniors Who Are Married Filing Jointly
Seniors with a spouse who is also 65 or older who file jointly are required to file a federal income tax return if their combined gross income exceeds $28,700, not including Social Security payments. If the spouse is under the age of 65, this combined earning threshold is slightly reduced.
If seniors who are married and file their taxes jointly only receive income through Social Security payments, they do not have to file an income tax return.
In certain cases, seniors are required to include their Social Security payments in their gross income, such as when seniors are married and live with their spouse at any time during the tax year but file their tax returns separately.
In this situation, all of the Social Security benefits must be included in their gross income, which may push their income over the threshold and require them to file a federal income tax return.
Exceptions
If, during any year, the sum of half of a senior’s Social Security plus all of their other income exceeds $25,000 if they are single or $32,000 if they are married and filing jointly, their Social Security benefits must be included in their gross income. Other income in this situation includes tax-exempt interest.
When Social Security Income Is Included In Gross Income
If a senior’s income is above the IRS-determined threshold based on their filing status, they will be required to include their Social Security benefits in their gross income. In the situation where married spouses are filing separate tax returns and have lived together at all during that year, 85% of their Social Security benefits may have to be included as part of their taxable income. It is beneficial to note, however, that 85% is the maximum percentage of the benefits received by the senior and their spouse that could be considered taxable.
Based on the cost-of-living adjustment that is increasing Social Security benefits by 8.7% beginning in January 2023 and that Social Security is considered partially taxable income, this increase could result in seniors owing a tax liability to the IRS. For this reason, it is beneficial to plan ahead for the upcoming tax season.
Tax Benefits For Seniors
There are several tax exemption examples for seniors that can offset the tax payable on their income, such as:
- Tax breaks through qualified charitable distributions.
- Credit for the elderly and disabled (this tax credit will not issue a tax refund).
- Property-related tax breaks.
- Not having an early withdrawal penalty in their tax-deferred retirement accounts.
- Additional IRA deduction savings.
- Free tax assistance through the Tax Counseling for the Elderly program.
- Catch-up contributions for their 401 (k).
- A standard tax deduction amount that is $1,750 higher than that for individuals under the age of 65.
- A higher income threshold for required tax filing.
- A higher contribution limit for health savings accounts (HSAs).
If you are 65 or older and feel unsure about your taxpayer responsibilities, the tax professionals and Ideal Tax can help you navigate your finances to ensure you are up to date with the IRS. Whether you need help identifying your tax bracket and tax rate, or if you want guidance through the tax preparation and filing process, we will ensure you feel confident in your tax filing (or lack thereof).
Luis serves as the Director of Operations for Ideal Tax, overseeing a multifaceted team including case management, tax professionals, document specialists, customer support, training, and development.
