To ensure you have enough money to enjoy everything Youngtown has to offer, it's important to minimize your tax burden. Here are three tips to help you get a handle on your taxes.
Credits and deductions benefit taxpayers in different ways. A credit is an amount of money you're allowed to subtract from the taxes you owe. For example, if you owe $6,000 in taxes and qualify for a credit worth $1,000, you can use that credit to reduce your amount owed to $5,000.
A deduction is an amount of money you can subtract from your income. Applying deductions reduces the amount of income subject to tax, saving you money. The Internal Revenue Code includes several credits and deductions that may help seniors.
The standard deduction allows you to subtract a certain amount from your income without meeting any specific criteria. It's available to everyone who doesn't itemize their deductions. For 2024, the standard deduction is $14,600 for individual taxpayers and married couples filing separately, $21,900 for heads of household and $29,200 for married couples filing jointly.
The good news for seniors is that the IRS offers an extra standard deduction for taxpayers who fall into one of these categories:
If you're at least 65 years old or blind, the extra deduction is $1,950 for single filers and heads of household. It's $1,550 per qualifying individual if you're married filing jointly or separately.
The deduction is much higher for individuals who meet both requirements. If you're single or file as the head of your household, the deduction is worth $3,900. Married couples receive $3,100 per qualifying individual, regardless of whether they file jointly.
The EDTC allows you to subtract $3,750 to $7,500 from the amount of tax you owe. To apply this credit, you must be a qualified individual and have an income that falls below a certain threshold. You're a qualified individual if you meet either of these criteria:
In most cases, you must also be a U.S. citizen or a resident alien to use the EDTC. The income limits for this credit are as follows:
If you have out-of-pocket medical expenses that aren't reimbursed by your health insurance provider, you may be able to claim the medical expense deduction on your federal return. You can only use this deduction if your unreimbursed medical and dental expenses total more than 7.5% of your adjusted gross income. This includes doctor visits, prescription medications, preventive dental care and hospital fees.
For example, if you have an AGI of $40,000, you may be able to claim this deduction if your unreimbursed medical and dental expenses exceed $3,000. You must meet several other criteria to use this deduction, so consult the IRS website or speak to a tax professional for guidance specific to your situation.
Your Social Security payments aren't taxable unless you have "other substantial income." The income limit depends on your filing status. If you file as an individual, head of household or qualifying widow(er), your other income must total less than $25,000. For married couples, it's less than $34,000 if you file separately and less than $44,000 if you file jointly.
Note that this applies to your federal tax return. Your state may tax Social Security payments, so consult a tax professional if you're not sure. If you do anything to earn extra money, such as writing news articles or selling crafts, monitor your income carefully to ensure you don't exceed the threshold. Otherwise, you may have to pay taxes on your Social Security benefits, wiping out some of the extra money you earned.
If you're at least 65 at the end of the tax year, you also qualify for a higher filing threshold. This threshold is the amount of income you can receive without having to file a federal tax return. For 2023, the threshold ranges from $14,700 to $28,700 depending on your filing status.
