It is that time of retirement and a new life begins all over again for the retirees. Now there is no more busy schedule for the person who has been working tirelessly for so many years. It is time to relax a bit from the busy lifework and take a break.
After retirement, retirees will have more control over their tax status they will now be able to take decisions on where to withdraw monies that were stashed away in retirement plans. Before one retires they should endeavor to put their tax issues in order it will come in handy after retirement. With these effective strategies retirees can keep their taxes low.
1. Standard Deductions- Retirees can now coordinate on the taxable distributions such as the mortgage,real estate and medical expenses, using the standard deduction and their personal exemptions. These two will help the retiree know how much of their income will be tax free. That is why it is important for the retiree to be fully aware of their tax information way before they retire.
2. Increase on the Retirement distributions- Retirees can increase their retirement distributions when they have excess deductions. If the standard deductions exceed the taxable income then one should consider withdrawing more funds from the retirement plans. When an individual increases their income when they have low taxes, this will save the individual from paying more taxes at the end of the year.
3. Applying for the Credit for the Elderly- The individual can take the special tax credit for taxpayer who are aged 65 years and above. This however has to be done with careful planning, because there certain limits that will fall beneath certain gross income rates.
4. Take Advantage of the Tax Free Income- This is a good chance for the retirees to exclude up to $ 250,000 in capital gains from selling their home, or if one is married then they can exclude up to $ 500,000. The interest earned from municipal bonds will be exempted from tax. It is also advisable for an individual to keep their taxable distributions at a low minimum will push more income for the individual to future tax years ahead.
Retirees who need help with how to do proper tax planning should seek help from experts in this field who will guide them on who to plan well for their taxes. With proper tax planning one should be able to have their tax status in order.