10 Tax Breaks That People Over 50 Are Missing Out On: Don’t Make This Mistake!

If you're over 50 and don't know much about taxes, you may miss out on big ways to reduce your tax liability and save money. Taxes are a part of life, and knowing a bit about tax law can help you not lose to much money to the IRS.

Learning a bit about the tax laws can help you save a good deal of money. Don't worry – these are not any illegal tax avoidance schemes that could get you locked in jail. These are 100% legal and even encouraged by the government to reduce your tax liabilities.

In this article, we will discuss 10 of the best tax breaks people over 50 can take advantage of. Keep reading to learn how to pay less in taxes.

1. Property Tax Breaks

Owning a house, is not only a place where we can call home, but it offers an opportunity to save money on taxes. These tax breaks on property can help reduce the amount you owe on your property taxes, which means more money in our pockets.

But how do you claim these tax breaks on our house? It's pretty straightforward. When you prepare your annual tax return, include the amount you've paid for property taxes in your itemized deductions.

If you itemize your deductions on your taxes, you could include mortgage payments and property taxes that are levied by state and local governments. It is a win-win for owning a house. You have a place to live, and you could deduct some of the costs from your taxes.

2. Qualified Charitable Donations

Charitable donations are more than just a way to give back to your community. They can also help you at tax time – when you donate to a qualifying charity, you can claim a tax deduction.

This deduction lowers your overall taxable income. You can easily find out which charities qualify by asking your local IRS office or checking the list of eligible charities online. You have to mention and add proof of the amount you donated.

3. Retirement Fund Tax Breaks

Retirement accounts come with their own tax breaks. If you are in a higher tax bracket, you could opt for a regular 401K or IRA that is funded with pre tax contributions. This can allow you to have a smaller income to be taxed, and when you get into a lower tax bracket in retirement you will have saved money with less going to taxes.

Investing is not only a great way to create more money for the future, but it can help reduce your tax burden. Always do the math to make sure you are making the best decision for your situation.

4. Medical Expense Deductions

Medical expenses can take a chunk out of your budget – thankfully, some relief is available in tax deductions. If you've had significant out-of-pocket medical costs, you might be eligible for a medical expense deduction, and that is something you should look into.

These costs include prescription medications, doctor visits, surgeries, and even mileage for medical travel. You may benefit from some tax reductions due to these medical costs.

Keeping all your receipts and records is the key to claiming this deduction. When it's time to file your taxes, you must itemize these deductions. It's more work, but it could result in significant savings.

5. Social Security Benefits Tax Exemption

Did you know that your Social Security could be taxed? It is an interesting thing as in you paid this money while you are working, and now you have to pay more money due to taxes. If you are an individual and your income is below $25,000 you may not be paying taxes on the Social Security. If you are filing jointly, that amount equates to $32,000 combined. If it is between $25,000 and $34,000 as an individual then 50% of your income will be taxed.

So it is always best to seek tax experts to figure out the best situations. Nothing is ever free money.

6. State Income Tax Breaks

State income tax laws vary widely across the country, and it is frustrating that each state has different tax laws. Washington has no income tax, while Oregon has no sale taxes. Some states offer generous tax breaks, while others have no state income tax at all. For those that do, these tax breaks can help reduce the state income tax you owe.

You'll need to file a state income tax return to claim these breaks. Be sure to check with your state's tax department or a tax professional to understand what deduction you may be eligible for when you file.

7. Education Tax Breaks

Education expenses happen to a bunch of us. It is not only for those 18-20 year olds, but it could be for the parents that help pay for the tuition as well. That can be a huge plus for us looking for tax breaks.

Depending on your financial situation, you could grab a tax credit or two for you or your child. The deductions for qualified tuition payment lasted in 2020, but there two credits to look into: The American Opportunity Credit and the Lifetime Learning Credit.

Talk to a qualified tax professional to learn more about these credits and other educational-related tax breaks.

8. Business Tax Breaks

You can take advantage of some business tax breaks if you're self-employed. These tax breaks can include deductions for home office expenses, travel costs, health insurance premiums, and even some solo 401K payments.

It is best to keep track of your business expenses throughout the year so you can easily claim them when it comes time to file your taxes. These deductions can significantly reduce your taxable income, so explore all the business tax breaks available to you.

Here is a good guide of some of the tax credits you can get from the IRS.

9. Investment Expenses

Investing comes with costs like advisor fees, investment interest expense, or other related costs that can empty your pocket more than expected, but did you know you could deduct some of these expenses? 

If you use a margin or a loan to buy an investment property, you can deduct the interest paid on money you borrowed to purchase those taxable investments. So, you could deduct interest from a margin loan if you have $8,000 in taxable investment income, such as capital gains or dividends. If there is leftover interest, you could use that in the following year.

It's not just a good idea; it's essential to keep track of all the investment-related interest you may have accrued in the year.When tax time comes, having these records could be a powerful tool in your financial arsenal, potentially leading to significant tax benefits if you have itemized deductions. 

10. Tax Deduction For Elderly and Disabilities

If you are over 65 or have a disability, you may be eligible for certain tax deductions. This tax deduction is offered because seniors and persons with disabilities often have higher medical expenses.

In order to claim it, you'll need to provide proof of your age or disability. Depending on your financial situation, you may be able to deduct a portion of your medical expenses and other related costs.

Knowing Tax Breaks Can Save You Money

Taxes are something we do not like paying or dealing with. It is helpful to learn about these tax breaks so we can save more and worry less about our taxes. So take some time and learn more about how you save on your taxes.

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