Paying taxes can be very stressful especially during old age. With expenses that can be overwhelming, it is necessary to look out for tax deductions for seniors and retirees that could help them during their golden age. It is essential to have a comprehensive understanding for you to avoid making more payment than required. It is also necessary to educate yourself regarding the rules that are applicable through which you can keep your tax bill to the minimum.

Here are four tax tips for seniors and retirees that they should adhere to:

1. Consider your RMDs
If you have any sort of retirement plans like 401k, IRA or any plan sponsored by an employer, you are expected to withdraw money from your account once you reach the age of 70. The amount to be withdrawn is known as required minimum distribution or RMD. The IRS specifies the amount for your RMD based on a number of factors including your age. They also offer a worksheet that helps you evaluate the amount that is to be withdrawn from the account each year. In the absence of an RMD, you will be liable to pay a tax penalty which would be similar to 50% of the amount to be withdrawn.

2. Pay tax with your distributions
A lot of people don’t like to opt for RMDs because the distributions from the particular accounts are subject to taxes. When you owe taxes you are liable to pay them as they involve the pay-as-you-go system which expects you to pay the amount as the money comes in. When you are working this is handled by the employer that withholds your money and sends it to the IRS but in the absence of work you need to be careful about the taxes. You can withhold your money from taxes through pension checks and through IRA managing institutions or 401k trustees. It is important to understand the process of tax deduction for seniors and retirees and how you can withhold your money.

3. Be aware of your Social Security benefits
There are good chances for seniors to receive money from their Social Security. Therefore, it is essential to understand as to when and how the benefits are taxed. The taxation of Social Security occurs when your income goes beyond a particular threshold. Income is defined as half of your Social Security benefits which include some taxable and no taxable income including municipal bond trust. A total of 50% of your Social Security benefits will be taxed if you file as a single person with an income of $25,000 and above or as married with an income above $32,000. You are also required to have a complete understanding of the state rules related to Social Security benefits. This will help you calculate the amount that can be withdrawn and the taxes you have to pay.

Make tax deductions for seniors and retirees easy with the above points and gain a complete knowledge regarding the functioning of taxes.