Senior tax issues are the not same as for younger people as there are several senior tax issues that only apply to people age 60+.
Senior Specific Tax Issues
For example, because the average fixed annuity owner is age 66, tax issues affecting fixed annuities are basically senior tax issues. The same would be true of tax issues affecting long term care as the average long term care insurance buyer is age 62. And since you must be age 62 in order to get social security benefits, anything impacting the taxation of social security benefits becomes an issue of tax planning for seniors.
Additional retiree-specific tax issues would include:
- the taking of a reverse mortgage (a tax free source of cash or income) that can only be obtained by someone age 62 or older
- the mandatory distributions from IRAs and other retirement accounts only apply to people age 70 1/2 and older and the ability to take distributions without tax penalty generally apply only to those age 59 1/2 and older (such distributions get added to income and increase tax)
- charitable giving, while doable by a taxpayer of any age, is done mostly by older people. The manner in which charitable gifts are made and the form the the gift (e.g. cash. appreciated stock, depreciated land, etc.) have a tax impact for the donor. The tax deduction for some gifts may be limited.
- as to estate taxes, there are very few people under age 60 that do any estate planning to estate taxation becomes a tax planning issue for seniors. Setting up special trusts like GRITS and GRATS are highly dependent on their success on the number of years that the grantor will live. Therefore, such trusts are really a tax device of older people.
other estate tax issues which are almost exclusively concerns of seniors:
- making gifts to younger generations as a way to reduce estate size and estate taxes (currently limited to $13,000 per donee per year)
- avoiding estate tax for younger generations - a plethora of tax saving strategies are available
So as we see, the tax landscape is quite different for seniors than it is for other age groups. Although the tax code applies to all US taxpayers of any age, you can quickly see that many issues that require tax planning are specific to retirees.
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