Retirement usually means no longer going through the daily grind at work and having more time for things you enjoy. But, it doesn't automatically relive you of all your duties, including filing a tax return. Depending on your circumstances, the Internal Revenue Service might still be expecting a return from you even if you are fully retired.
If your gross income exceeds the filing threshold, you must file a tax return even if you consider yourself retired. Gross income includes any income you received that isn't tax-exempt before you take off any deductions or credits. As of 2013, if you're single and under 65, you must file if your income exceeds $9,750. If you're 65 or older the limit jumps to $11,200. For joint filers, when both spouses are under 65, the threshold is $19,500. When one spouse has reached 65, the limit increases to $20,650. If you're both 65 or older, Uncle Sam doesn't expect a return until your gross income hits $21,800.
If you've truly retired and don't receive a paycheck from anyone anymore, you might be wondering how you would meet the income threshold. First, if you receive any taxable retirement income, such as distributions from traditional individual retirement accounts or 401(k) plans, that's income you need to report on your taxes. Second, you might also have investment income, like interest or dividends. Or, if you've downsized to a smaller home and sold your old one for a profit, some of the gain might count as taxable income, too.
Social Security Benefits
You might also have to pay taxes on a portion of your Social Security benefits, depending on your "combined income." Your combined income equals your adjusted gross income plus any nontaxable interest income, like municipal bonds, plus half your Social Security benefits. As of the 2012 tax year, you pay taxes on up to half your benefits if you combined income falls between $25,000 and $34,000 if you're single or $32,000 and $44,000 if you file a joint return. If your combined income is higher, up to 85 percent of your benefits count as taxable income.
Even if you haven't reached the gross income threshold for the year to have to file, you might get money back if you've had money withheld. For example, if you only took small distributions from your 401(k) plan, you might have had taxes withheld in excess of your actual tax bill, such that filing a return gets you the money back. Depending on where you live, you might also be eligible for a refundable tax credit, either from the federal government or your state. For example, Kansas offers a homestead refund for taxpayers over 55 of up to $700 for property taxes paid if your income falls below the annual limit.
- Internal Revenue Service: Publication 17 -- Your Federal Income Tax
- Internal Revenue Service: Do You Need to File a Federal Income Tax Return?
- Kansas Department of Revenue: Homestead Refund
- Internal Revenue Service: Rollovers of Retirement Plan Distributions
- Social Security Administration: Benefits Planner: Income Taxes And Your Social Security Benefits
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