Making it to the half-century milestone should be rewarded in some way, and the Internal Revenue Service is ready to provide those benefits.
As soon as you reach the age of 50, you become eligible for certain tax discounts that are not available to younger taxpayers. These tax breaks include increased retirement account contributions and other benefits.
According to the AARP, some of the tax incentives stretch back more than two decades, when they were incorporated in the Economic Growth and Tax Relief Reconciliation Act, which went into force in 2002.
The provisions were put in place because some members of Congress were concerned that baby boomers were not saving enough for their golden years. A number of additional tax-saving features were incorporated into the Tax Cut and Jobs Act of 2017.
Here’s a quick breakdown of some of the tax breaks you’ll be eligible for after you reach the age of 50 and beyond:
- Increased contribution limits for retirement accounts: The contribution limit for most employees who have 401(k), 403(b), most 457 retirement saving plans, and the federal government’s Thrift Savings Plan has been raised to $20,500 in 2022 from $19,500 in 2021, with the exception of those who have a Roth 401(k).
Employees above the age of 50, on the other hand, can receive an additional $6,500, for a total of $27,000.
- Increased contribution limits for Health Savings Accounts: Most taxpayers can contribute up to $3,650 to HSAs if they have individual health insurance coverage, or up to $7,300 if they have family health insurance coverage, depending on their income.
If you turn 55 during the year, you will receive an additional $1,000 in benefits. Just keep in mind that any amount your employer contributes that is not included in your taxable income will reduce your contribution limit by the same amount.
- Taxpayers receive a standard deduction that decreases their taxable income and, as a result, lowers their tax burden when they reach the age of sixty-five (65). For the year 2022, the standard deduction will be $25,100 for most married couples.
The standard deduction is $12,550 for single taxpayers and married individuals filing jointly and separately. However, if you are 65 or older and file as a single taxpayer, you will be entitled to an additional $1,700 standard deduction for tax year 2021 and an additional $1,750 standard deduction for tax year 2022, respectively.
- Making Your Taxes? How Covid-19 Boost May Effect Your Debt| New Updates!
- In March 2022, there will be 37 states where Social Security benefits are not taxed| Latest News!
- East Texas Christian Radio Station Collects Nearly 30,000 Diapers for Charities|
Even if you are married and filing jointly, you can take advantage of the additional standard deduction of $1,350 if just one spouse is 65 or older.
In the case of a couple who is both 65 or older, the additional standard deduction is $2,700. The additional deduction is doubled for taxpayers who are 65 or older and blind at the same time.
Another potential benefit is that if you are 65 or older and do not have a difficult tax return, you can utilise the new simplified Form 1040-SR for seniors, which is designed just for seniors.
If you still want to file paper returns, the form has a larger typeface to accommodate you.