Retirees may find that managing their taxes becomes more complicated once they leave employment and few take full advantage of the many tax breaks for which they are eligible. Understanding how these tax deductions work and knowing which can be applied to a return is important to maximizing a retiree’s refund.
One area where retirees often miss deductions is expenses related to medical or dental treatments. Few deduct their monthly insurance premiums, prescription drugs, or other long-term healthcare services. This is because it requires itemizing their deductions, which takes more work. Financial experts do remind retirees that their medical expenses must exceed a specific minimum before they become tax-deductible. Currently, that amount is 7.5 percent of their adjusted gross income, but that may change in 2017.
A related deduction that few retirees take, according to CPA Ryan Himmel, is for expenses related to nutritional supplements and vitamins. If doctors prescribe a vitamin or supplement, the cost may qualify as a deductible. Many other health-related items can also be deducted, including prescription glasses, dentures, wheelchairs, and hearing aids. However, items paid for by health insurance are not eligible.
The IRS also allows deductions for medical-related travel. Retirees often visit doctors and specialists more than younger people, and some may not be able to drive themselves. The cost of taxi services, mileage and lodging expenses incurred on trips made specifically for medical purposes can be counted as a deduction if the retiree files an itemized return.
Let the free Retirement Planner by MoneyTips help you calculate when you can retire without jeopardizing your lifestyle.