Elderly Taxes, Credits & Social Security
Senior citizens over age 65 who are retired due to a disability may qualify for a separate tax credit designed to help the seniors and disabled. The tax credit for the elderly and disabled is also available to persons who are under age 65 and disabled.
What is the Credit for the Elderly and Disabled?
Tax credit for the elderly or disabled is a special credit for older taxpayers that allows individuals to reduce their income tax by their allowable credit (limited to the amount of income tax due –deductions can only reduce your tax bill in proportion to tax rate).
If your tax credit exceeds your income tax, you will not be able to obtain the excess credit as a refund. In other words, you cannot claim the credit if you earned more than your income limit.
In general, the tax credit for the elderly or disabled is 15 percent of the initial amount, minus the total of nontaxable social security benefits and other nontaxable income you received (nontaxable pensions, disability benefits, or annuities).
Who Qualifies for Elderly Tax Credit?
Only persons who meet specific criteria can claim the elderly tax credit.
- You need to be elderly – at least 65 years of age by the end of the tax year.
- If you are disabled, you must be retired to disability (permanently and completely disabled before you retire) and receive taxable disability income during the year.
- You must be a U.S. citizen or resident alien for tax purposes.
- You need to be younger than your employer’s mandatory retirement age before the beginning of the tax year.
- Married couples must file a Married Filing Joint return.
- If you are filing a joint tax return with your spouse, your partner must also meet the elderly tax qualifications.
- Couples who live together during the year but file separate returns do not qualify for the credit.
The IRS establishes income guidelines for each tax year.
Is Being Elderly a Disability?
Aging in itself is not a disability. Many older adults live without a disabling condition. However, the United Nations report estimates that more than 46 percent of the aging population worldwide – aged 60 years and over – live with some form of disability. At the same time, more than 250 million older people experience moderate to severe disabling conditions.
According to the ADA, more than 30 percent of elderly Americans (over age 65) have some kind of disability. The numbers increase with age, so more than 50 percent of the U.S. population age 75 and older experiences some disabling condition.
Many start to suffer from chronic diseases such as arthritis, diabetes, hypertension, or dementia as people get older. Other aging individuals experience injuries or develop problems with mobility, seeing, or hearing.
The Americans with Disabilities Act; Definition of Disability
The ADA defines a disability as “a physical or mental impairment that substantially limits one or more major life activities,” preventing the person from performing the basic activities of daily living (ADLs), getting around at home and outside, and participating in their community.
A person who has a history of such an impairing condition is considered a person with a disability. The most common disabilities in the aging population involve:
- Difficulties seeing or hearing
- Problems with mobility and getting around
- Cognitive difficulties caused by dementia
- Chronic diseases (hypertension, diabetes, arthritis, etc.)
According to a U.S. Census Bureau report, mobility is the most common disability among aging Americans.
The U.S. Census Bureau report for the period 2008-2012 stated that nearly 40 percent of people age 65 and older (15.7 million people) had at least one disabling condition. The majority (two-thirds) of those people reported having difficulty in walking or climbing.
The second reported disability involved difficulty with independent living such as shopping or visiting a doctor’s office; hearing impairment, cognitive difficulty, problems dressing or bathing, and serious difficulty seeing followed.
Is the Elderly Tax Credit Refundable?
The senior tax credit for the elderly and disabled is non-refundable. This means that you cannot receive a credit larger than the remaining taxes you owe.
The tax credit for the elderly and disabled applies to the taxes you owe. For example, if you owe $2,500 in taxes, but you have a credit for $500, you will have to pay $2,000.
According to income eligibility criteria, to qualify for the elderly tax credit, your adjusted gross income (AGI) or a combination of your non-taxable income (disability, pension annuity income, and Social Security income) must fall below threshold limits listed in IRS Publication 524 – Credit for the Elderly or the Disabled.
To determine whether you qualify for this credit, you need to fill out Schedule R. IRS Publication 524.
Do You Pay Taxes after 70 Years Old? Do 80 Years Old Pay Taxes?
If you are older than 65 with an income of more than $11,850 and live without dependents, you must file an income tax return. Income tax requirements are based on the nature and amount of your income, not your age, so you may or may not be free from paying income tax after 70, depending on your situation.
As many senior citizens over age 70 earn below the income minimums, most of them are not required to file.
Since many of those aged 70 and older earn below the income minimums, it’s common to generalize and say seniors aren’t required to file or pay income taxes.
If your income comes only from Social Security benefits, you can stop filing taxes as taxed income does not include Social Security benefits.
However, being exempt from federal taxes does not mean that you are also exempt from state taxes, so make sure to follow the specific state regulations and rules.
Does Social Security Count as Income for Taxes?
If you are over 65 and live alone on an income of more than $11,850, you are required to file an income tax return. However, if part of your income comes from Social Security, this amount doesn’t need to be included in your income’s gross amount.
At What Age is Social Security Income Tax Not Taxable?
After age 62, your Social Security benefits may not be taxable, depending on your other income earned. The elderly who only receive Social Security benefits do not have to pay federal income tax. If your income partially comes from Social Security, you don’t need to include this part in the gross amount. If you are married and both of you are older than 65, your combined income must be lower than $23,100 if you plan to stop filing taxes.
Does My Elderly Mother Need to File Taxes?
No, if your elderly mother’s only source of income is Social Security. Seniors whose only income is Social Security owe no federal taxes, so they do not need to file a return with the IRS.
What is the Senior Tax Credit for 2019?
The senior tax credit for 2019 ranges between $3,750 and $7,500.
How Much Can a 70-Year-Old Make while on Social Security?
If you are full retirement age or older and you work, you can earn as much as you want and still receive the total amounts of your benefits.
How Much Can I Earn in 2020 and Still Collect Social Security?
If you are younger than full retirement age and earn above specific amounts, your social security benefits will be reduced. However, your benefits will increase when you reach the full retirement age to account for the amount of the benefits withheld while you worked. For example, if your monthly Social Security benefit is $700, and you earn $18,240, you will receive yearly benefits of $8,400.
Continuing to work past 70 could increase your taxes. If you are a single filer and your combined income (your income plus one-half of your Social Security benefits) is between $25,000 and $34,000, you may have to pay taxes on 50 percent of your benefits. For income over $34,000, you may have to pay taxes on up to 85 percent of your benefits. Existing limits for married couples filing jointly are $32,000 to $44,000 and more than $44,000, respectively.
Do You Still Have to Pay Medicare Tax After Age 65?
There is no age limit on FICA taxes (Medicare and Social Security taxes). The Federal Insurance Contribution Act taxes apply regardless of your age. Medicare tax is one part of the Federal Insurance Contribution Act (FICA) that your employer deducts of your gross earnings along with Social Security tax.
So, if you are 75, still working, you will still pay FICA taxes on your income.
As long as you continue to work, you must pay Medicare taxes on all your earnings for as long as you continue to work.
You may be charged more for Medicare premiums if you earn over a threshold (for 2020, the threshold for single filers is $87,000 and $174,000 for married filing for taxes jointly).
You become eligible for Medicare when you turn 65 years of age. Once you are retired, you no longer have to pay Medicare or Social Security taxes.