Few Americans like filing their income taxes. And so as you approach retirement, you may want to know if you will get a reprieve from this annual obligation as you age. The answer, though, isn't as simple as yes or no. Here's what any senior citizen needs to know about taxes as they get older.
Taxes Aren't Based on Age
The bad news for retirees is that filing and paying income taxes in the United States isn't based on age. There is no upper age limit when you no longer have any tax obligations, nor is there a lower age limit before it begins.
What, then, determines your tax responsibility? The amount and sources of income. A retiree who relies solely or largely on Social Security may not have to file. On the other hand, a baby who stars in a commercial may have taxable income to report.
Filing Forms Doesn't Equal Tax Due
If you do have to file income tax forms each year, this doesn't necessarily mean that you will have a tax bill.
The retiree who gets a pension along with their Social Security checks may earn enough combined income to be obligated to file Form 1040. However, they still have all the same credits and deductions as other taxpayers, including things like health savings account deductions and deductions for adult dependents, as well as a higher standard deduction over age 65. The result may still be few or no taxes due.
Your Tax Situation May Change
Just because you enter retirement or reach 65 or 70 years of age with enough potential taxable income to file doesn't mean it will stay that way.
For instance, a retiree who draws down their 401(k), which is generally taxable, may have to file taxes until they run out of that income and begin to rely on Social Security checks alone. Then, their income source and amount may make filing no longer necessary. Therefore, every retiree should continue to check in on their tax obligations as their finances change over time.
You Should Start By Asking for Help
It may be disappointing to know that income tax filing may be something you're stuck with for the foreseeable future, but retirees can get help. An experienced tax preparation service will help you analyze your personal earning and expense situation to ensure you pay the least amount allowable. And then, no matter what retirement holds, you can complete your annual obligations with confidence and even optimism.
Contact a local tax preparation service to learn more.