Everyone is looking for an opportunity to reduce their income tax burden. This is especially important if you live in a fixed or confined area, such as the elderly.
There are many items that are incorporated into both the IRS tax law and Ohio to reduce the income tax burden on older people. Some of these are little known and can be overlooked by those who self-prepare their income tax returns.
One of the first benefits is that some or all of your social security may not be subject to federal income tax, all of which is exempt from Ohio taxation.
Whether you need to pay taxes on some of your social security benefits depends on your application and your total income. Total income is the sum of adjusted total income, tax-exempt interest, and half of social security benefits. Up to 85% of social security benefits can be taxed at the federal level. That is, at least 15% of these benefits are exempt from federal income tax and all benefits are exempt from Ohio income tax.
Older people are entitled to a larger standard deduction. Taxpayers over the age of 65 who file separate single or married declarations are entitled to a standard deduction of $ 14,050, which is $ 1,650 higher than if they were under the age of 65. For taxpayers aged 65 and over who file their tax returns as householders, the standard deductions are: $ 20,300 compared to $ 18,650 for householder filers under the age of 65. Married taxpayers who file jointly are entitled to a standard deduction of $ 26,100 if one taxpayer is 65 or older and $ 27,400 if both taxpayers are 65 or older. Standard deductions are charged when the standard deduction exceeds the sum of the itemized deductions. This is common in the elderly.
Higher standard deductions also create higher filing standards for older people.
One taxpayer over the age of 65 can earn up to $ 14,050 before filing requirements occur. Married couples, both taxpayers and spouses aged 65 and over, can earn up to $ 27,400 before filing requirements occur. However, if you have a tax withholding that allows you to get a refund, we recommend that you apply in both cases. In addition, recent stimulus payments often require taxpayers to file in order to receive this stimulus.
Ohio has up to $ 200 in retirement income credits per return, which can be overlooked by those who prepare their own returns.
This credit is available to Ohio taxpayers whose total adjusted income less tax exemption is less than $ 100,000. The second requirement is to receive a retirement allowance, pension, or distribution created from a pension or retirement plan that includes an IRA. You must be receiving these benefits because the taxpayer has retired and needs to include this income in Ohio’s adjusted gross income.
Taxpayers do not have to be completely retired and not working, but they are receiving income because they have retired from their source of retirement income. In other words, taxpayers who have retirement income from their first job but work in another position are still eligible for credit.
The actual amount of credit is based on the amount of eligible retirement income and varies from $ 25 in retirement income to $ 500 to $ 1,500 per year and up to $ 200 in retirement income over $ 8,000 per year.
Remember, a tax credit is a direct dollar for a dollar reduction in income tax obligations, a much greater tax benefit than a deduction of the same amount.
It is important to be aware of tax-saving opportunities.
For retirees, this is even more important to save retirement money and take advantage of these savings opportunities built into tax law.