Retirement Income Falls Subject to Taxes
When you retire, you are most likely to receive forms for various pension income such as distributions from previous employers and for social security benefits. These types of retirement income should be reported on your form 1040 return, as well as any other income that was received during the year.
In addition, if you are working part-time and you are retired, if you earn more than you filing threshold you may have to file a return. According to the social security administration, an individual qualifying taxpayer $17,040 for 2018. Most likely you would have to file a return if you’ve earned income from a hobby or self-employment.
One can also receive less in SSA monthly benefit payments if you’re earning income above the filing threshold. Once full retirement is reached, and federal benefits are drawn, social security can deduct $1 out of every $3 earned above the annual limit in benefits. The general rule for retired individuals who are to file returns is that taxes would be based on the income bracket for earnings (of the total tax year). This is according to the information on the Investopedia website.
Also, if you are at the age of 65 (or older) and need to file a return, do not itemize your deductions as this may increase your standard deduction by $1,550 if you file as head of house or single. If you are married and 65 years or older, filing jointly may increase the standard deduction by $2,500, which is allowed by the tax reform act.
Deductibility of medical and dental services which is also preserved in the tax reform bill, can be one of the largest expense categories for retired people. 6. A million taxpayers with the annual income below $75,000 use the medical expense deductions. This is according to AARP which supported this provision in the tax bill. In addition, taxpayers are able to deduct medical expenses exceeding 7.5% of their income. This is in 2017 and 2018.
In 2019 however, the threshold will return to the 10% level. In preparation for filing your tax return make sure to document all taxable income with similar records along with proof of payments such as charitable donations, mortgage payments and out of pocket medical expenses. You may wish to consult a trusted and licensed financial advisor for specific questions about your individual tax situation.
