Considerations When Filing as a Retieree

Often, retirees are those who worked hard during their lives and look forward to retirement during their golden years. Today, people live longer and are healthier, and therefore enjoy longer and more active retirements. Toward the end of their careers, retirees may have looked forward to retirement as a time when life would become less complicated. However, for income tax purposes, life as a retiree may be more complicated than life in the workforce.

Provisional Income

Retirees earning social security benefits should examine their provisional income to determine if they have a tax liability for social security benefits. Some social security recipients may be exempt from paying federal income tax; others must pay taxes on up to 50 or 85% of their benefits.

Credit for the Elderly or Disabled

A retired taxpayer may be eligible for the Credit for the Elderly or the Disabled. Like any other tax credit, it is a dollar-for-dollar reduction of your tax bill. The maximum credit available to a taxpayer ranges from $3,750 and $7,500.

A retired taxpayer can take the credit, provided he or she meets the following criteria:

1. The taxpayer is a qualified individual, meaning that the taxpayer is retired and age 65 or older or is retired on permanent and total disability; and
2. The taxpayer's adjusted gross income does not exceed $12,500 for a single filer and $25,000 for those married filing jointly; and
3. The taxpayer's non-taxable income from social security or other non-taxable pension does not exceed $3,750 if a single filer or $7,500 for those married filing jointly.

Retirees worked toward receiving their social security benefits, yet those benefits may be taxable. What's more, calculating tax on those benefits is complicated. Retirees may also be eligible for a tax credit. Each individual retiree's income level will determine tax liability.