Going from a full-time job to being a retiree can mean major financial changes. You will most likely have to cut back on everyday expenses and be more frugal—but one expense you can’t escape is your taxes. Here are tax tips for retirees from an accountant in Denver:
Understand What’s Taxable
Many retirees are completely unaware what is taxable and what’s not, so it’s recommended that you meet with an accountant in Denver to go over your tax situation after you retire. Traditional IRAs and income from dividends or interest are all taxable, so if you use any of these sources to finance your retired life, make sure you realize you will have to pay taxes. However, some accounts, such as Roth IRAs, are not taxable because you paid into them using after-tax money. Understand the difference between a traditional IRA vs. Roth IRA
Deduct Medical Expenses
It’s no secret: the older you get, the more medical expenses you will incur. But, did you know many of these expenses are tax deductible? If you are a retiree, don’t forget to deduct any expenses you have paid for in-office copays, prescription drugs, and Medicare premiums. But, these deductions don’t apply to all retirees. If you’re 65 and older, you can deduct these expenses if the total cost you paid is at least 7.5% of your adjusted gross income.
Donate to Charity
Money may be tight when you’re retired, so giving to charity may be the last thing on your mind. However, you don’t have to open your pocketbook in order to take advantage of charitable tax deductions. All you have to do is clean out your house and donate any items you don’t want—just make sure you get an itemized receipt as proof. This will help you save money on your taxes while also tidying up your home.
Deduct Your Mortgage Interest
If you’re a retiree who is still paying a mortgage, it’s important to deduct your interest payments from your taxes to save money. Even if you’re not paying a lot in interest because you have almost reached the end of your mortgage payments, every last dime helps, so don’t forget about this important deduction.
If you have your eye on retirement, be sure to plan how you will pay your after-retirement taxes ahead of time. Begin putting money aside while you are still employed so you don’t have to panic to pay your annual tax bill. Although many advisers recommend thinking about retirement in your 20s and 30s, it’s ok if you don’t give it a second thought until you’re in your 50s. This still gives you plenty of time to put funds aside that will benefit you once you retire.
Are you retired or thinking of retiring? Don’t file your taxes on your own. Bloch, Rothman & Associates, Ltd. is a full service accounting firm offering personal and affordable tax and accounting services in Denver for individuals and businesses. Contact Block, Rothman & Associates in Denver
for a free initial consultation.