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Senior & Retirees

Find answers to common tax questions unique to seniors and retirees while learning more about the special tax benefits available to the elderly. 

New Tax Return Version for Seniors

(Form 1040-SR)

In 2019, the IRS introduced a new version of the income tax form for individuals age 65 and older. The form is the same as the Form 1040 (U.S. Individual Income Tax Return), but it features larger font and an easy to read table that lists the various standard deduction amounts. These new features attempt to increase awareness of the higher standard deduction amount available to seniors age 65 and older.

Higher Standard Deduction

The normal standard deduction amount for an individual filing as single in 2020 is $12,400. However, there is a higher standard deduction amount for individuals who are 65 years of age and older, and for individuals who are blind. If you satisfy the age or blindness condition, then you may claim the higher standard deduction amount of $14,050. If you satisfy both the age and blindness conditions, then you may claim $15,700. Note also that the higher standard deduction amount varies based on your filing status and, if applicable, whether your spouse qualifies based on one or both conditions. For more information, see the FAQ on this topic below.

Required Minimum Distribution

& Retirement Accounts

Unfortunately, federal law does not allow you to keep retirement funds in your account indefinitely without taking any withdrawals from the account. The required minimum distribution (RMD) is the minimum amount you must withdraw from your retirement account each year to avoid penalties. For more information, see the FAQs below.

Social Security Benefits: Taxable?

Your social security benefits may be taxable if the total of one-half of your benefits, plus all of your other income (including tax-exempt interest) is greater than the base amount for your filing status. The base amount for your filing status is:

  • $25,000 if you are single, head of household, or qualifying widow(er);

  • $25,000 if you are married filing separately and lived apart from your spouse for the entire year;

  • $32,000 if you are married filing jointly; or

  • $0 if you are married filing separately and lived with your spouse at any time during the tax year.

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Use the IRS's Interactive Tax Assistant tool to quickly determine whether your benefits are taxable. For more information, see the FAQ on this topic below.

Seniors: Frequently Asked Tax Questions

General

Social Security: I retired last year and started receiving social security payments. Do I have to pay taxes on my social security benefits?

Probably. Your benefits may be taxable if the total of one-half of your benefits, plus all of your other income (including tax-exempt interest) is greater than the base amount for your filing status. The base amount for your filing status is:

  • $25,000 if you are single, head of household, or qualifying widow(er);
  • $25,000 if you are married filing separately and lived apart from your spouse for the entire year;
  • $32,000 if you are married filing jointly; or
  • $0 if you are married filing separately and lived with your spouse at any time during the tax year.
If you are married and file a joint return, you and your spouse must combine your incomes and social security benefits when calculating the taxable portion of your benefits. Even if your spouse did not receive any benefits, you must add your spouse's income to yours when calculating the taxable portion of your benefits on a joint return. Social security benefits include monthly retirement, survivor and disability benefits. They do not include supplemental security income (SSI) payments, which are not taxable. The net amount of social security benefits that you receive from the Social Security Administration is reported in Box 5 of Form SSA-1099 (Social Security Benefit Statement) and you report that amount on line 5a of Form 1040 (U.S. Individual Income Tax Return). The taxable portion of the benefits that is included in your income and used to calculate your income tax liability depends on the total amount of your income and benefits for the taxable year. You report the taxable portion of your social security benefits on line 5b of Form 1040. For more information, see the following IRS resources:



My children receive social security survivor benefits, are these benefits considered taxable income?

It depends. To find out whether any of the child's benefits are taxable, compare the base amount for the child's filing status with the total of: (a) one-half of the child's benefits; plus (b) all of the child's other income. If the total amount is greater than the base amount, then a portion of the child's benefits may be taxable. For more information, see IRS Publication 915 (Social Security and Equivalent Railroad Retirement Benefits).



How long do I have to file a claim for a tax credit or refund?

Generally, you have either 3 years or 7 years, depending on your situation. 3 years – You generally have 3 years from the date you filed your original tax return to file a claim for a tax credit or refund. If, however, you paid the tax, you then only have 2 years from the date you paid the tax to file a claim for a tax credit or refund. 7 years – If you are seeking a tax refund related to bad debt deductions or a loss from worthless securities, then the deadline to file your refund claim is 7 years from the return due date.



Do I need to file a separate return if a relative (or someone else) can claim me as a dependent on their tax return?

If a relative (or someone else) can claim you as a dependent, use the guidelines below from the IRS Form 1040 Instructions to determine if you must file a return. Single Dependents (age 65 or older, or blind) You must file a return if ANY of the following apply:

  • Your unearned income was over $2,750 ($4,400 if 65 or older and blind);
  • Your earned income was over $13,850 ($15,500 if 65 or older and blind); or
  • Your gross income was more than the larger of:
    • $2,750 ($4,400 if 65 or older and blind), or
    • Your earned income (up to $11,850) plus $2,000 ($3,650 if 65 or older and blind).
Married Dependents (age 65 or older, or blind) You must file a return if ANY of the following apply:
  • Your unearned income was over $2,400 ($3,700 if 65 or older and blind);
  • Your earned income was over $13,500 ($14,800 if 65 or older and blind);
  • Your gross income was at least $5 and your spouse files a separate return and itemizes deductions; or
  • Your gross income was more than the larger of
    • $2,400 ($3,700 if 65 or older and blind), or
    • Your earned income (up to $11,850) plus $1,650 ($2,950 if 65 or older and blind).



Pensions & Annuities: Do I have to pay tax on the pension or annuity income I receive?

Probably. If you receive retirement benefits in the form of pension or annuity payments from a qualified employer retirement plan, all or some portion of the amounts you receive may be taxable. For a quick way of determining whether your pension or annuity payment from an employer-sponsored retirement plan or nonqualified annuity is taxable, consider using the IRS’s Interactive Tax Assistant Tool (Is My Pension or Annuity Payment Taxable?). Note, the tool does not address IRAs. Fully Taxable Payments The pension or annuity payments that you receive are fully taxable if you have no investment in the contract (sometimes referred to as "cost" or "basis") due to any of the following situations:

  • You did not contribute anything or are not considered to have contributed anything for your pension or annuity;
  • Your employer did not withhold contributions from your salary; or
  • You received all of your contributions (your investment in the contract) tax-free in prior years.
Partially Taxable Payments If you contributed after-tax dollars to your pension or annuity, your pension payments are partially taxable. You will not pay tax on the part of the payment that represents a return of the after-tax amount you paid. The “after-tax amount you paid” is equal to the amount of your investment in the contract and includes the amounts your employer contributed that were taxable to you when contributed. Taxpayers figure the tax on partly taxable pensions by using either the General Rule or the Simplified Method. For more information on the General Rule and Simplified Method, see IRS Topic No. 411. If the starting date of your pension or annuity payments is after November 18, 1996, you generally must use the Simplified Method to determine how much of your annuity payment is taxable and how much is tax-free. Additional 10% Tax on Early Distributions If you receive pension or annuity payments before age 59½, you may be subject to an additional 10% tax on early distributions, unless the distribution qualifies for an exception. The additional tax does not apply to any part of a distribution that's tax-free or to any of the following types of distributions:
  • Distributions made as a part of a series of substantially equal periodic payments that begins after your separation from service;
  • Distributions made because you are totally and permanently disabled;
  • Distributions made on or after the death of the plan participant or contract holder; or
  • Distributions made after your separation from service and in or after the year you reached age 55.
For other exception to the additional 10% tax, see IRS Publication 575 (Pensions and Annuity Income). Other Situations Special rules apply to certain non-periodic payments from qualified retirement plans. For information on the special tax treatment of lump-sum distributions, see IRS Topic No. 412. If you receive an eligible rollover distribution, the payer must withhold 20% of it, even if you intend to roll it over later. You can avoid this withholding by choosing the direct rollover option. A distribution sent to you in the form of a check---made payable to the receiving plan or IRA---is not subject to withholding. For more information on rollovers, see IRS Topic No. 413 (Rollovers from Retirement Plans) or use the IRS’s Interactive Assistant Tool to determine whether you should report cash or property moved from one IRA (or other retirement account) to another. For more information, see IRS Topic No. 410 (Pensions and Annuities).



Higher Standard Deduction: Do I qualify for a different standard deduction amount if I am 65 years or older?

Yes. There is a higher standard deduction amount available for individuals who are 65 years of age and older, and for individuals who are blind. If you satisfy the age or blindness condition, then you may claim the higher standard deduction amount of $14,050 (for 2020). If you satisfy both the age and blindness conditions, then you may claim $15,700. Note also that the higher standard deduction amount varies year-by-year based on your filing status and, if applicable, whether your spouse qualifies based on one or both qualifying conditions. You can find the full list of higher standard deduction amounts on the chart attached to the last page of the Form 1040-SR. Remember, the higher standard deduction is only available to individuals who do not itemize their deductions. Additionally, the following taxpayers are prohibited from claiming the standard deduction:

  • A married individual filing as married filing separately whose spouse itemizes deductions;
  • An individual who was a nonresident alien or dual status alien during the year (see below for certain exceptions);
  • An individual who files a return for a period of less than 12 months due to a change in his or her annual accounting period; or
  • An estate or trust, common trust fund, or partnership.
However, certain individuals who were nonresident aliens or dual status aliens during the year may take the standard deduction in the following cases:
  • A nonresident alien who is married to a U.S. citizen or resident alien at the end of the tax year and makes a joint election with his or her spouse to be treated as a U.S. resident for the entire tax year;
  • A nonresident alien at the beginning of the tax year who is a U.S. citizen or resident by the end of the tax year, is married to a U.S. citizen or resident at the end of such tax year, and makes a joint election with his or her spouse to be treated as a U.S. resident for the entire tax year; and
  • Students and business apprentices who are residents of India and are eligible for benefits under paragraph 2 of Article 21 (Payments Received by Students and Apprentices) of the United States-India Income Tax Treaty.



Retirement

What does the term "required minimum distribution" mean? How do I know if it applies to me and my retirement account?

Unfortunately, federal law does not allow you to keep retirement funds in your account indefinitely without taking any withdrawals from the account. The required minimum distribution (RMD) is the minimum amount you must withdraw from your retirement account each year. RMD rules apply to: (a) traditional IRAs; (b) SEP IRAs; (c) SIMPLE IRAs; (d) 401(k) plans; (e) 403(b) plans; (f) 457(b) plans; (g) profit-sharing plans; and (h) other defined contribution plans. Beginning Date for Your First Required Minimum Distribution

  • For IRAs (including SEP and SIMPLE IRAs), the begnning date of your first RMD is:
    • April 1 of the year following the calendar year in which you reach age 72 (or 70 ½ if you turned age 70 ½ prior to January 1, 2020).
  • For 401(k), profit-sharing, 403(b), or other defined contribution plan, the beginning date of your first RMD is:
    • Generally, April 1 following the later of the calendar year in which you retire or reach age 72 (or 70 ½ if you turned age 70 ½ prior to January 1, 2020).
Date for Receiving Subsequent Required Minimum Distributions For each subsequent year after your beginning date, you must withdraw your RMD by December 31st. Note, though, the first year following the year you reach age 72 (or 70 ½ if you turned age 70 ½ prior to January 1, 2020), you will generally have two required distribution dates:
  • An April 1 withdrawal (for the year you turn 72 (or 70 ½ if you turned age 70 ½ prior to January 1, 2020), and
  • An additional withdrawal by December 31 (for the year following the year you turn 72 (or 70 ½ if you turned age 70 ½ prior to January 1, 2020)).
To avoid having both of these amounts included in your income for the same year, you can make your first withdrawal by December 31st of the year you were required to take your first distribution instead of waiting until April 1st of the following year. Consequence for Failing to Take Required Minimum Distributions If you do not take any distributions, or if the distributions are not large enough, you may have to pay a 50% excise tax on the amount not distributed as required. Required Minimum Distributions After the Account Owner Dies For the year of the account owner’s death, use the RMD the account owner would have received. For the year following the owner’s death, the RMD will depend on the identity of the designated beneficiary. Calculating Required Minimum Distributions for Designated Beneficiaries Beneficiaries of retirement accounts and IRAs calculate RMDs using the Single Life Table (Table I, Appendix B, Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs)). The table shows a life expectancy based on the beneficiary’s age. The account balance is divided by this life expectancy to determine the first RMD. The life expectancy is reduced by one for each subsequent year. For more information, see IRS Topic: Required Minimum Distributions (RMDs).



Credits

Credit for the Elderly or Disabled: Are there any tax credits available exclusively for the elderly?

Yes. The "Credit for the Elderly or the Disabled" ranges between $3,750 and $7,500. You can claim the tax credit for the elderly or the disabled if you meet both of the following conditions:

  1. You are a qualified individual; and
  2. Your income is below the threshold limit.
To quickly determine if you are eligible for the credit, use the IRS's interactive assistant tool. Otherwise, continue reading to see if you may be eligible. Qualified Individual You are considered a qualified individual if you are a U.S. citizen or resident alien, and you satisfy either of the two following conditions:
  1. You were age 65 or older at the end of 2019; or
  2. You were under age 65 or older at the end of 2019 and all three of the following conditions are true:
    1. You retired on permanent and total disability;
    2. You received taxable disability income for 2019; and
    3. On January 1, 2019, you had not reached mandatory retirement age.
Income Limits To determine if you can claim the credit, your adjusted gross income (AGI) must be below a certain limit AND your nontaxable social security and other nontaxable pensions, annuities, or disability income ("SSPAD") must be below a certain limit. Both income limits depend on your filing status, and can be found below:
  • Single
    • AGI must be equal to or less than $17,500 AND nontaxable SSPAD must be less than $5,000
  • Married Filing Jointly (and one spouse is a qualified individual)
    • AGI must be equal to or less than $20,000 AND nontaxable SSPAD must be less than $5,000
  • Married Filing Jointly (and both spouses are qualified individuals)
    • AGI must be equal to or less than $25,000 AND nontaxable SSPAD must be less than $7,500
  • Married Filing Separately (and you lived apart from your spouse all year)
    • AGI must be equal to or less than $17,500 AND nontaxable SSPAD must be less than $5,000
These income limits are for the 2019 tax year.



Health Coverage Tax Credit: What is this and who qualifies?

The Health Coverage Tax Credit (HCTC) is a tax benefit that subsidizes the costs of private health insurance coverage for certain individuals. The credit equals 72.5% of the health insurance premium costs paid by an eligible individual. The HCTC was originally set to expire at the end of 2020, which resulted in all participants being removed from the HCTC Advantage Monthly Program. However, in December 2020, Congress extended the HCTC through the end of 2021. With the extension of the HCTC for 2021, participants may be able to work with their vendors or providers to be placed back on health coverage that qualifies for the HCTC and either re-enroll in the HCTC Advance Monthly Program or claim the HCTC on their annual Federal income tax return filed next year. Credit Amount Individuals enrolled in the HCTC Advance Monthly Program may request reimbursement for 72.5% of the payments they paid directly to their vendor or provider for 2021 qualified health coverage by:

  1. Filing Form 14095 (HCTC Reimbursement Request) once they've submitted a payment through the program for 2021; or
  2. Filing Form 8885 (Health Coverage Tax Credit) to claim reimbursement on their annual Federal income tax return.
Individuals not enrolled in the HCTC Advance Monthly Program, or those enrolled with vendors or providers not participating in the program, may also be eligible to claim reimbursement for 72.5% of their payments for 2021 qualified health coverage by:
  • Filing Form 8885, Health Coverage Tax Credit, with their annual Federal tax return.
Eligible Individuals The HCTC is restricted to following two groups of individuals:
  • Individuals eligible for Trade Adjustment Assistance (TAA) or Alternative TAA (ATAA/RTAA) allowances because of a qualifying job loss; and
  • Individuals between 55 and 64 years of age whose defined-benefit pension plans were take over by the Pension Benefit Guaranty Corporation (PBGC).
  • The Family member of one of these two eligible groups of individuals who is deceased or who finalized a divorce with the individual.
Note, you are not eligible for the HCTC if any of the following situations apply:
  1. You can be claimed as a dependent on another person’s federal income tax return;
  2. You are enrolled in Medicare, Medicaid, the Children’s Health Insurance Program, or the Federal Employees Health Benefits Program or are eligible to receive benefits under the U.S. military health system (TRICARE); or
  3. You are enrolled in an Affordable Care Act Marketplace insurance.
Re-Enrolling in the HCTC Advance Monthly Program Individuals who were previously enrolled in the program may re-enroll by:
  • Submitting a new Form 13441-A (Health Coverage Tax Credit Monthly Registration and Update); or
  • Providing all required documentation including a copy of the health insurance bill reflecting their 2021 insurance rates.
Forms may be submitted to the IRS by one of the following methods:
  1. Mail to the address on the form;
  2. Fax to 855-250-1731 (include your HCTC PIN or last four of your SSN on each page you fax); or
  3. Email to wi.hctc.stakehldr.en@irs.gov (include a cover sheet with the date, your name, and either your HCTC PIN or last four of your SSN).