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5 Tax Tips for Retirees

Retirees, and those about to retire, face some daunting tax questions and dilemmas. Depending on how much you have prepared for retirement will increase your enjoyment during retirement. Unfortunately, no two retirements are the same. Regardless if you are living on a pension, social security, investments, or a combination, below are some tips a retiree will benefit from.

1. Choose the state you live in wisely. All states have different ways of taxing retirees. For instance, California and New York are considered non-tax friendly, while Arizona and Florida are considered tax friendly. The differences include: sales tax, tax on social security, property tax, income tax, and inheritance tax. Be sure to do your research, the different tax burdens state-to-state can be in the thousands of dollars.

2. While keeping the above tip in mind, choose a state which does not tax your social security earnings. Some retirees only have their social security to live off each month. Living in a state such as Nebraska or Minnesota which tax social security, may be too much for a retiree to handle.

3. Reassess your living situation. Some individuals enjoy a large home, some look for amenities, while others value a country over city living. If you prefer a large home, know a significant portion of your retirement will go towards maintenance, care, and property tax based on square footage. The size of your home is a completely personal decision, but base it off of your needs verses your desires. Shaving a few thousand dollars off of your property tax bill can make a huge difference.

4. Take advantage of credits and deductions during your yearly federal tax filings. Leaving “money on the table,” as some may say, could greatly affect your bottom line. If you usually do your taxes yourself, consider utilizing a tax preparing service during your first full year of retirement. By doing so, you will have a baseline tax return for future years. This professional prepared filing will show you ways on how to make these deductions, which may prove useful in the future.

5. Lastly, and if you have money to spare, give it away! This may sound counter intuitive, but you will receive tax benefits from gifting or donating your retirement money.

Again, no two individuals will be in the same retirement situation. What will be good for you may not be good for your neighbor. However; one thing no individual has ever been harmed by is having a solid retirement plan.

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Why Americans Struggle to Save

It has been well documented American’s have had a difficult time in terms of saving money. Regardless if you are saving for a down payment on a home, or retirement, Americans are having an increasingly difficult time. The possibilities and reasoning behind these difficulties are numerous. Below are several reasons which continually hamper our saving aspirations.

Over The Limit
It is quite obvious some Americans simply live outside their means. Do not confuse this as an individual not making enough money. A person who lives outside of their means typically will purchase a flashy home or car. They will have the latest and greatest phone or gadget which they are always replacing with “the next big thing.” They dine out regularly and sabotage their savings frequently.

Over Estimators
Individuals, especially those saving for retirement, may overestimate their savings and pensions. If an individual is saving for retirement, they may want to speak with a financial planner who is well versed on the subject. A financial planner will help you meet your goals.

Credit Junkies
Americans have an unhealthy obsession with unsecured credit debt. It is not uncommon for individuals to have three or four credit cards in their wallet. Some of these credit cards have interest rates approaching thirty percent. If an individual is to have any hope of saving money, they will have to first get from under any credit debt they may have.

Easy Access
At no point in history have Americans had such easy access to the money in their bank accounts. With an ATM machine on every corner and a debit card in every wallet, we spend money like mad. Checks are a thing of the past. No longer do we have to endure the pain of writing out a check. Today, the swipe of a card means money in our pocket. Such easy access to cash means our savings dwindle.

Though the above reasons may not particularly pertain to you, they pertain to many Americans. Some estimate two out of three American have deep concerns in their retirement savings. The American credit debt, though down, is still close to a trillion dollars. Even our federal government has a difficult time in terms of relying on credit debt. The point is, everyone is in the same boat together. Build a spending plan and stick to it. You will be on your way to saving for that Jet Ski in no time.

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4 Tax Penalties and How to Avoid Them


It is not easy to file your own taxes. In fact, when you run a business or have more than just the standard deduction, you will run into problems if you make one or two slight errors. While this is true, most issues are largely avoidable provided you know what you are doing and what to avoid. With this in mind, here are four tax penalties and how to avoid them.

Underpayment of estimated tax
Now, when filing, some people will need to pay their taxes as they go. This is often the case for retired people or entrepreneurs who run their own companies. For this reason, it is wise to pay the right amount as the IRS will penalize a consumer severely. Of course, if you have sporadic income, you can pay in four equal amounts to avoid penalty. Either way, when paying too little in taxes, you are going to have to deal with the repercussions. For this reason, if you are in a constant battle with the IRS over this, you should consider hiring a professional who can make the estimated tax payments on your behalf. Otherwise, if this problem reoccurs, you will have to pay the penalty again.

Late filing
Believe it or not, even with all the technology available, many still file too late. When this happens, you will have to pay a penalty in many cases. Other times, if you did not make enough money or paid all your taxes through your employer, you may skirt by untouched. With that being said, it is wise to file on or before the filing deadline. Remember, while it is easy to procrastinate, it is not a wise thing to do too much as it is costly to file too late. Instead, when you receive your tax documentation, you should do a quick estimate on how much you will owe. Then, if you will receive a refund, you should file quickly and get your money. On the other hand, if you owe, you should fill out the forms and send them in the last possible day.

Home office deductions
While working from home, you can write off some home office costs. However, this is a tricky subject and it is wise to talk to a CPA who can advise you on your best course of action. At the same time, when using this deduction, you should remember to save your receipts and keep everything in perfect order. You must realize that the IRS cracks down on this, and you should keep perfect records. At the same time, if audited, you should be prepared to explain your situation and fight for your rights as an agent will listen if you provide the right information.

Math errors
If you make a huge math error, you may end up paying some more to the IRS. If you use a program or online-based filing service, you should not experience any issues. Of course, if you use a pen and paper, you should double-check your math and ensure there are no issues. Luckily, if the error is minor, you should only have to send in the extra money.

Without a doubt, people make mistakes when dealing with the tax authorities. If you can avoid these four common pitfalls, you can avoid any penalties.

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10 Tax Filing Mistakes to Avoid

We’re in the middle of tax season, and you may already have received a refund. If your process isn’t complete, avoid these common tax filing mistakes.

1. Not filing at all is illegal an can lead to fines. You’ll also lose out on tax refunds when you don’t file.

2. Filing too late can be costly. Prepare all your documents in January so you have plenty of time to file taxes before the April deadline. Collect receipts, W2s, 1099 forms and other paperwork, including rent certificates, well ahead of time. If you need an extension, apply for one to avoid fines.

3. Filing taxes yourself works fine when you have a simple return. However, complicated returns, small business owners and other situations require a professional.

4. Forgetting all the possible credits — claiming yourself, homestead credits and even tuition tax write-offs — can severely shrink your refund. This is especially important when you work from home.

5. Remember to add any donations to charity as write-offs on your taxes. Most charities will provide you with a receipt for your records, which you should make sure to file away safely until tax time.

6. However, lying on your taxes or writing off items such as that new car or television that aren’t actually deductible can lead to an audit by the IRS. You can make it easier by separating business and personal finances through separate accounts or creating an LLC.

7. Furthermore, make sure to add all of your income, even if it was in cash. Bloggers have learned the hard way to report any revenue over $25, and even items given to you in return for your work count as payment. Similarly, alimony and prize winnings must also be reported on your taxes.

8. Math errors can lead to greater fines or shrink your refund. Double-check your math. If math isn’t your strong suit, have someone else look at it. This might be the time to consider hiring a professional.

9. Double-check the spelling of your name, and ensure that your name is correct if you’ve recently changed it. New spouses often run into glitches because of a name change. Otherwise, the IRS might take longer to process your tax return.

10. Lack of or poor organization when it comes to taxes can be costly because you may have to file late or retrieve copies of paperwork before you can file.

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How to Do Your Taxes if You’re Paying Tuition

For those parents who feel that children are a blessing, here is yet another reason to see them as so. Parents who pay their child’s college tuition will be happy to know that thanks to Uncle Sam, they can receive education credits and tax deductions on tuition and fees, room and board, books, supplies, student loan interest payments, qualified student loan payments, and more, for a qualifying child enrolled in college.

Who Qualifies?

Students who are:

  • Full time students
  • Under 24 years of age
  • Provides less than half of his or her own support
  • Filing as single or married filing separately


  • Adults who are:

  • Paying yourself through school
  • Spouse paying for your partner’s grad school

  • Student Loan Interest Deduction

    Up to $2,500 of your student loan interest can be deducted on your taxes as long as: (1) the individual’s adjusted gross income isn’t more than $75,000 for a single person and no more than $150,000 if they are married, (2) their filing status is not “married filing separately, and (3) they can’t be claimed as a dependent on their parents taxes.

    Lifetime Learning Credit

    Parents may be eligible to claim up to $2,000 of the lifetime learning credit for qualified students enrolled in an eligible institution as long as; (1) they pay qualified education expenses for higher education, (2) the eligible student is yourself, your spouse, or a dependent the parent claims an exemption for on their taxes, and (3) parents pay education expenses for an eligible student.

    American Opportunity Credit

    If parents pay eligible college expenses for themselves or a qualified student, and they are single with an AGI less than $80,000, less than $160,000 for married couples, they may be eligible for a maximum annual credit of up to $2,500 per student.

    How to File

    Even if the parent or the parent’s child/children meet the requirements for both the Lifetime Learning Credit and the American Opportunity Credit, they can only receive one of them for each student in the same year. Parents can, however, spread the credits amongst qualifying students and alternate between them each year. According to the IRS, when doing your taxes, individuals should compare the tuition fee deductions they or their children qualify for to see which gives the biggest break then claim that credit on their tax return.

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