The tax code is filled with lots of little gems for baby boomers, says Brian Ashcraft, director of Liberty Tax Service, headquartered in Virginia Beach. Here are a few of our favorites with a special H/T to Ashcraft:
1. New Year's Day babies can celebrate extra.
The IRS –- in many cases -– says you turn 65 on the day before your 65th birthday, and that can be a nice perk if you were born on New Year’s Day, says Ashcraft. Here’s why: You qualify for an additional $1,200 to your standard deduction if you’re 65 or older. For the 2014 tax year, you’re 65 even if your actual birthday falls on Jan. 1, 2015.
2. Caregivers do get a break, at least on their taxes.
If you're a caregiver for your parents, an adult child or a grandchild, you may qualify for a tax benefit related to their support when you itemize your deductions. To qualify, you must provide more than half of their financial support, and their annual income must be below $3,950. When you’re calculating their income, Ashcraft says, make sure you include unemployment compensation, pensions, interest, dividends and withdrawals from retirement plans. But if you are taking care of an aging parent, Social Security and disability payments typically are excluded from income consideration.
3. Your dependent's medical expenses are also deductions.
If you meet the criteria for the dependent exemption, you can deduct your dependent’s medical expenses if the expenses are more than 10 percent of your adjusted gross income if you’re under age 65, and more than 7.5 percent of your adjusted gross income if you’re 65 or older. Again, you must itemize your deductions. Expenses can include ambulance services, bandages, dentures and out-of-pocket prescription drug costs. It can also include TV or telephone adapters, hearing aids and wigs, even weight-loss programs, if they are related to a medical condition or treatment.
4. Do you ever feel like an unpaid taxi service?
If you drive your dependent to see the doctor, that mileage can be deducted at the rate of 23.5-cents per mile. If you must stay overnight while a dependent has a medical procedure, you can deduct $50 per night for each person for lodging. It’s important that you keep detailed records of your expenses and log your miles to and from doctors’ appointments. For more information, see IRS Publication 502.
5. Charity can be more than just writing a check.
Charity extends further than donating money or old clothes and furniture, according to the IRS. Many retirees also donate their time. You may not deduct the value of the services you give to a qualified organization, but you may be able to deduct some of what you pay out in the course of giving those services, Ashcraft says. For example, if you must wear a uniform that identifies you as a hospital volunteer, you can deduct the cost and upkeep of the uniform.
6. Your car use may be deductible.
Unreimbursed out-of-pocket expenses, such as the cost of gas and oil, directly related to the use of your car in providing volunteer services may be deducted. If you do not want to deduct actual expenses, you can take a standard mileage rate of 14 cents per mile. You may also deduct parking fees and tolls, even if you use the standard mileage deduction. As with your medical expenses, you must keep detailed records of your dates of service, mileage, and more. For more information, see IRS Publication 526.
Ashcraft says that the tax code "can be your best friend at tax time or it can be an enemy." He suggests working with a certified tax preparer who knows the code and can help reduce your tax liability.