Taxes 2023: Tax Breaks for Filers Over 50
Making it to the half-century mark should come with certain rewards, and the IRS is ready to hand them out. Once you turn 50 years old you begin to qualify for certain tax breaks that younger taxpayers don’t enjoy, including the ability to contribute more to retirement accounts.
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Some of the breaks date back 20 years, when they were included in the Economic Growth and Tax Relief Reconciliation Act that took effect in 2002, the AARP reported. The provisions were put in place because some lawmakers worried that boomers weren’t saving enough for retirement. Other tax-saving provisions were added in the Tax Cut and Jobs Act of 2017.
Here’s a quick rundown of some of the tax breaks you’ll enjoy once you turn 50 and older:
Higher contribution limits for retirement accounts: The contribution limit for most employees with 401(k), 403(b), most 457 retirement saving plans and the federal government’s Thrift Savings Plan has been raised to $22,500 in 2023 from $20,500 in 2022. But employees 50 and older can add an additional $7,500, for a total of $30,000.
Higher contribution limits for Health Savings Accounts: Most taxpayers can contribute up to $3,850 to HSAs if they have coverage for themselves, or up to $7,750 for family coverage. The catch-up is an additional $1,000 if you reach 55 during the year. Just keep in mind that your contribution limit is reduced by any amount your employer contributed that has been excluded from your income.
Bigger standard deduction at age 65: Taxpayers get a standard deduction that reduces their taxable income and lowers their tax bill. For 2023, most married couples will get a standard deduction of $27,700. For single taxpayers and married individuals filing separately, the standard deduction is $13,850. But if you are 65 or older and file as a single taxpayer, you get an extra $1,850 standard deduction. If you are married and filing jointly, the extra standard deduction is $1,500. For taxpayers who are both 65 and older and blind, the extra deduction is doubled.
Another potential benefit is that you can use the new simplified Form 1040-SR for seniors if you are 65 or older and don’t have a complicated tax return. The form features a larger typeface it you still file paper returns.
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