It is important to realize that changes may occur in this area of law. This information is not intended to be legal advice regarding your particular problem, and it is not intended to replace the work of an attorney.
The Federal Income Tax laws apply to all taxpayers and provide certain
preferential treatment for taxpayers who are age 65 or older. Some
preferential treatment is given to all taxpayers in this age group,
and additional benefits are available to those who qualify for additional
preferential treatment because of individual circumstances.
All taxpayers 65 or older have two potential benefits: first, a special gross income requirement, and second, an increased standard deduction for age.
Gross income is generally defined as all the income you receive — whether in the form of money, property and services — that is not expressly exempt from tax by law. If you are age 65 or older and had gross income of a specified amount for the tax year, you must file a federal income tax return even if you owe no tax. (If your gross income is less than certain limits you may not need to file a tax return.) This required amount of gross income differs, according to whether you are single or married, and whether you and your spouse are age 65 or older. Your local Internal Revenue Service office can give you the amount of gross income required for filing a tax form.
However, there are other circumstances under which you must file a federal income tax return if you are 65 or older: if you are self-employed and had a particular amount in net earnings; had income from tips from which no Social Security tax was collected; or you are the survivor, executor, administrator or legal representative of a person who died during the year. Details of the procedure for filing under these circumstances need to be obtained from your local IRS office.
The second preferential treatment is an increased standard deduction. If you are age 65 or older on the last day of the tax year, you are allowed a higher standard deduction.
Also an increased standard deduction for blindness is allowed — any taxpayer who is blind. Blindness, for the purpose of this exemption, is a legal definition, which can be obtained from your local IRS office. If your vision is no greater than that which is legally defined, then attach a statement from a qualified physician or registered optometrist to your tax return. A person who is totally blind needs only a statement to that effect attached to his or her return.
You may be interested in other benefits given for individual circumstances. There are two circumstance-specific benefits for individuals, and both require you to file Form 1040.
The first of these deals with the sale of your residence. You may exclude gain from the sale of your residence in an amount not exceeding $250,000. If you are married and file a join return, you can exclude $500,000 of gain from the sale of your residence. You must have used the home as your principal residence two out of the previous five years. You qualify for this exclusion every two years. Your local IRS office will be able to give you more details on these new residential sale exclusions.
Additionally, you may be able to receive a tax credit to offset or reduce your tax liability. The allowable credit varies with your filing status and income and is reduced by nontaxable income such as benefits received under Social Security, railroad retirement or Veterans Administration programs. If you are married, generally you must file a joint return, and the credit is also based on your spouse’s age and income. If you were a non-resident alien at any time during the tax year, you may be able to take the credit, but only if you are married to a U.S. citizen or resident alien, and you and your spouse elect to file a joint return.
Schedule R is used to figure the tax credit for the elderly. If you wish, the IRS will compute the credit for you.
Taxpayers 65 or older should refer to IRS publication 554, “Tax Benefits for Seniors.” This publication is available free by writing or calling your local Internal Revenue Service Office. It may also be found in the IRS website, www.irs.gov.
Legal editor: Steve Christensen, July 2008