2 Little-Known Tax Deductions That Can Save Baby Boomers Thousands

Here are two tips that can save boomers thousands on their tax bills for 2013 – and beyond

Mar 15, 2014 at 12:30PM
G

If you are a baby boomer edging toward retirement – and wondering how to reduce your tax burden in the meantime – you may be in luck. Depending upon your circumstances, you may be able to take advantage of a couple of sweet tax deductions that can save you pots of money starting right now, as well as continuing through the next few years leading up to retirement.

Best of all, these particular tax benefits just get better with age.

Long-term insurance premiums
It is often difficult to collect enough medical bills to make use of the deduction for medical and dental expenses – which must now exceed 10% of your adjusted gross income (for those 65 or older, the rate is still 7.5%). There may be some expenses that you don't know you may deduct, however, and adding them all up can push you over the law's threshold.

Long-term care insurance policy premiums are usually deductible, and the amount you may deduct increases as you age. For example, the allowable deduction is capped at $680 if you are between the ages of 41 and 50, but jumps to $1,360 when you turn 51. At age 61, the cap rises to $3,640. For many people, this robust deduction can form the foundation upon which other medical expenses can be added, enabling older Americans to take advantage of the medical expense deduction.

Health Savings Account
If you participate in a high deductible health plan and are not yet enrolled in Medicare, a Health Savings Account could be a real boon, saving you a hefty amount on your yearly taxes, as well as adding to your retirement cushion.

Doc

An HSA can be opened by anyone with a qualifying health care plan, and must be administered by a trustee – which can be any entity approved by the IRS to administer individual retirement accounts. Each year, you put pre-tax dollars into the account, which can then be used to pay qualified medical expenses until the deductible kicks in. Because you are paying for medical costs, the money is tax-free when you withdraw it, as well.

I'll bet you are already seeing the value of such an account, which offers great benefits. Individuals can contribute $3,250 annually to their accounts, families up to $6,450. If you are over 55, add another $1,000 to each of those contribution limits.

Taking this amount off your gross income is swell in and of itself, but the benefits go well beyond this perk. For instance, there is no requirement you spend all of your HSA contributions in any given year, so the kitty can really add up. Money from this account may also be used to pay long-term care insurance premiums, and the account belongs to you, so it is entirely portable. After age 65, you may use money in the account for purposes other than medical expenses without penalty, although you will have to pay income tax on the withdrawals.

Taking advantage of these health care-related deductions can really help lower your tax burden right now, something that becomes more important as retirement looms. And, unlike many other things in life, they actually become more attractive as the years go by.

The secret to a comfortable retirement
It's no secret that investors tend to be impatient with the market, but the best investment strategy is to buy shares in solid businesses and keep them for the long term. In the special free report "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. Click here to grab your free copy today.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers