Getting Ready For Tax Season: A Guide For Seniors & Caregivers

Tax season is right around the corner, and for seniors and caregivers, it’s an opportunity to ease the financial burden by taking advantage of tax benefits specifically designed for your unique circumstances. Did you know that certain medical expenses—including some senior living costs—may qualify as tax deductions? These deductions can help lower taxable income, making it an essential topic for seniors and caregivers to understand.

This guide will walk you through what you need to know about tax deductions related to medical expenses and senior living, as well as other helpful tax tips for seniors.

Medical Expenses as Tax Deductions

Medical expenses often represent a significant portion of a senior’s budget, but they also offer one of the most valuable tax deductions. If your medical expenses exceed 7.5% of your adjusted gross income, you may qualify to deduct those costs on your tax return.

What Counts as Qualifying Medical Expenses?

Luckily, the IRS takes a broad view of qualifying medical expenses. These include the cost of diagnosing, curing, mitigating, treating, or preventing disease, as well as costs related to treatments affecting any part or function of the body. Some examples include:

• Visits to doctors, dentists, and specialists
• Vision-related costs, such as glasses or contact lenses
• Prescription medications and insulin
• Durable medical equipment (Ex. hearing aids, wheelchairs, and oxygen tanks)
• Home modifications for accessibility
• Hospital services, including surgeries
• Long-term care services, if medically necessary
• Health insurance premiums
• Transportation costs for medical appointments

If you’re a caregiver for a senior, their medical expenses may also qualify if you claim them as a dependent.

Senior Living and Medical Expenses

For seniors living in retirement communities, a portion of their costs may qualify as a medical expense. This is particularly true if the senior requires specific medical or personal care due to a chronic illness or cognitive condition like dementia. 

The deductible portion typically covers nursing services, personal care, and other medically necessary expenses—as long as they meet the 7.5% Threshold.

To calculate the 7.5% Threshold and see if your medical expenses qualify:

1. Determine your adjusted gross income (AGI).
2. Multiply your AGI by 7.5% (Ex. $40,000 AGI x 0.075 = $3,000).
3. Medical expenses above this threshold may be deductible.

Keeping Track of Medical Expenses

Good record keeping is essential for maximizing deductions. Save all of your receipts, invoices, and statements that detail medical treatments, prescriptions, and senior living costs in a safe place or dedicated folder. It’s also important to separate strictly medical expenses from other living costs, like room and board, which may not qualify unless they are tied to a medical necessity.

Additional Tax Benefits for Seniors

Beyond medical deductions, seniors can explore several other tax advantages to make the most of their potential tax return:

Higher Standard Deduction

Did you know that seniors aged 65 and older qualify for a higher standard deduction? For 2023, the standard deduction for single filers is $13,850, but seniors can add an extra $1,850, bringing it to $15,700. 

Credit for the Elderly or Disabled

If you’re over 65 or permanently disabled and meet specific income requirements, you may qualify for the Credit for the Elderly or Disabled. This credit can directly reduce the taxes you owe and help with your personal finances.

Charitable Donations

Supporting a charity is not just a generous act—it can also help reduce your taxable income. Just be sure that your donations meet IRS guidelines before claiming them as deductions.

Filing Options and Deadlines

To ensure a smooth tax season, keep these important details top of mind:

• Filing Deadline: The standard deadline is April 15th. If needed, you can always request an extension until October 15th. However, any taxes owed must be paid by April to avoid penalties, so it can be helpful to start early. 
• E-Filing Options: The IRS Free File program offers no-cost filing for eligible taxpayers, and many of these tax services also provide discounts for seniors.
• Tax Counseling for the Elderly (TCE): The IRS sponsors this program to assist taxpayers aged 60 and older with specialized guidance on retirement income, medical deductions, and other important senior-related tax issues.
• Paper Filing: While still an option, paper filing can take longer to process. Be sure to double-check forms and signatures to avoid potential delays or errors.

Common Tax Mistakes to Avoid

Navigating taxes can often be complex, but being aware of common mistakes can help make it as simple as possible:

1. Missing Eligible Deductions: Don’t overlook medical or senior living expenses that qualify for deductions.
2. Filing Incorrectly: Ensure you’re using the correct forms and claiming senior-specific credits. Professional advice can help avoid costly errors.
3. Overlooking Required Minimum Distributions (RMDs): Seniors over 73 must take RMDs from traditional IRAs or 401(k)s. Failing to do so can result in penalties.

Preparing for a Stress-Free Tax Season

With a little preparation, tax season doesn’t have to feel overwhelming. Here are some helpful tips to make the process a lot easier:

• Start Early: Gather documents, receipts, and statements well in advance. This can help you avoid last-minute scrambling and ensures no deductions are overlooked.  Create a checklist of all the documents you’ll need, including tax forms like W-2s, 1099s, and retirement income statements, so nothing is forgotten.
• Consult a Professional: If your situation is complex—such as managing multiple income sources or significant medical expenses—a tax advisor can help ensure accuracy and maximize your potential savings.
• Stay Alert for Scams: Protect your personal information from tax-related fraud. The IRS will never call to demand immediate payment or request sensitive information over the phone or via email. 

Live Worry-Free at a Senior Lifestyle Community

At Senior Lifestyle, we understand managing finances, including navigating tax season. Our communities are designed to ease the stresses of daily life with services like housekeeping, meal preparation, and personalized care. These conveniences not only allow seniors and their families to focus on what truly matters but can also complement financial planning efforts, such as maximizing tax benefits and deductions tied to senior care.

Discover how Senior Lifestyle can make life easier for you or your loved one. Whether you’re looking for Independent Living, Assisted Living, or Memory Care, we’re here to support your journey.

Find out more about Senior Lifestyle or schedule a visit today!

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