Six Savvy Tax Deductions for Senior Retirees

Retiring can be both exciting and scary for seniors. It means you will have plenty of time to fulfill dreams your career may have distracted you from, but it also means a loss of a paycheck and living on a fixed income. Hopefully, throughout your working life you have planned and saved for this time, but even so, it makes sense to make the most of money you have by taking advantage of all of the tax deductions available to you. Give these six deductions a try to put the gold in your golden years.

Savvy deduction tip number one involves your medical and dental expenditures. Your medical bills usually go up as you get older, and the good news is that most of the cash you dole out at the doctor's office can come back to you in the form of tax deductions. In fact, everything from doctor's visits to insurance premiums to prescription costs can be used as a tax deduction, up to 7.5% of your adjusted gross income.

Tip number two involves selling your home. Many retirees downsize their homes later in life, and many find themselves looking at a huge profit when they sell their former home. Under capital gains tax laws, you can keep up to $500,000 in profits form the sale of your home, tax-free. Tip number three related to what you do with that profit. Even if you are officially retired, you can still make contributions to your retirement savings accounts. Put some of those home sale profits into your retirement savings account, and then take the amount of your contribution as a deduction on your taxes.

For savvy deduction tip number four, consider starting a small business during your retirement years. The business doesn't have to be demanding; you can simply parlay a hobby into a money making venture. The business doesn't have to turn a huge profit, either. As long as you can prove that you have the intention to make money, then the IRS looks upon your venture as business. Once your business is established, you can deduct all of your business expenses from your taxes. If your business is run out of your home, then that means you can deduct many of your normal living as at least partial tax deductions.

Tip number five is to do some good for humanity. Charitable contributions are tax deductible, up to 50% of your adjusted gross income. Most retirees find themselves in the position to contribute either cash or goods to charities; take advantage of these good works on your tax returns. To make the most of these deductions, make sure you get documentation from the charity for all of the donations you make.

Tip number six is to remember to increase your standard deduction amount. After you retire, as long as you don't itemize your returns, then you are eligible for a larger standard tax deduction amount from the government. Don't forget to claim it!

Your senior years offer plenty of opportunities to maximize your income by taking advantage of tax deductions. Don't forget to consider deductions for things like investment losses, energy efficient improvements to your home, or buying hybrid cards. To make sure you are not missing any potential deduction opportunities, it makes sense to hire a tax preparation expert to prepare your accounts. They can help you navigate complicated deduction paperwork and make sure all of your records are in order, to help you avoid any conflict with the IRS. IRS deduction rules change almost yearly, so it is important to make sure you are taking the proper deductions for the year in question.

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