Tax Guide 
for Seniors

Any economic recovery payment you received is not taxable for federal income tax purposes, but it reduces any making work pay credit or government retiree credit.

If you have earned income from work, you may be able to take this credit. It is 6.2% of your earned income but cannot be more than $400 ($800 if married filing jointly). For details, get Schedule M (Form 1040A or 1040), Making Work Pay and Government Retiree Credit.

You may be able to take this credit if you get a government pension or annuity, but it reduces any making work pay credit. For details, get Schedule M.

You do not have to pay tax on unemployment compensation up to $2,400 per person for the year. Amounts over $2,400 are still taxable. See the discussion under Compensation for Services, later.

The credit increases to as much as $8,000 ($4,000 if married filing separately) for homes bought after 2008 and before May 1, 2010 (before July 1, 2010, if you entered into a binding contract before May 1, 2010). If you bought the home after November 6, 2009, you may be able to claim the credit even if you already owned a home, but, in that case, the maximum credit is $6,500 ($3,250 if married filing separately). For details get Form 5405, First-Time Homebuyer Credit and Repayment of the Credit.

The maximum Hope education credit is increased to $2,500. The increased credit has been renamed the American opportunity credit and part of it is refundable. For details, get Form 8863, Education Credits.

The AMT exemption amount increased to $46,700 ($70,950 if married filing jointly or a qualifying widow(er); $35,475 if married filing separately). For details, get Form 6251, Alternative Minimum Tax-Individuals.

For most people who do not itemize their deductions, the standard deduction is higher in 2009 than it was in 2008. In addition to the annual increase due to inflation adjustments, your 2009 standard deduction is increased by:

• State or local real estate taxes you paid in 2009,
• State or local sales or excise taxes (or certain other taxes or fees in a state without sales tax) you paid on the purchase of a new motor vehicle after February 16, 2009, and
• Any net disaster loss from a federally declared disaster.

For more information, see chapter 4.

For 2009, you are not required to take an RMD from your IRA or most defined contribution plans.

The maximum amount of income you can earn and still get the credit has increased. You may be able to take the credit if you earn less than:

• $13,440 ($18,440 if married filing jointly), do not have a qualifying child, and are at least 25 years old and under 65,
• $35,463 ($40,463 if married filing jointly), and you have one qualifying child,
• $40,295 ($45,295 if married filing jointly), and you have two qualifying children, or
• $43,279 ($48,279 if married filing jointly), and you have three or more qualifying children.

For more information, see Earned Income Credit, later.

You lose part of the benefit of your exemptions if your adjusted gross income is above a certain amount. For 2009, the phaseout begins at $125,100 for married persons filing separately; $166,800 for single individuals; $208,500 for heads of household; and $250,200 for married persons filing jointly or qualifying widow(ers). However, in 2009, you can lose no more than 1/3 of the amount of your exemptions. In other words, each exemption cannot be reduced to less than $2,433. For more information, see Phaseout of Exemptions in Publication 501, Exemptions, Standard Deduction, and Filing Information.

Choose your preparer carefully. If you pay someone to prepare your return, the preparer is required, under the law, to sign the return and fill in the other blanks in the Paid Preparer's area of your return. Remember, however, that you are still responsible for the accuracy of every item entered on your return. If there is any underpayment, you are responsible for paying it, plus any interest and penalty that may be due.

Special rules apply to the use of retirement funds (including IRAs) by qualified individuals who suffered an economic loss as a result of:

• Hurricane Katrina, Rita, or Wilma,
• The storms that began on May 4, 2007, in the Kansas disaster area, or
• The severe storms in the Midwestern disaster areas in 2008.

See Publication 575, Pension and Annuity Income, and Publication 590, Individual Retirement Arrangements (IRAs), for information on these special rules.

If you are an unmarried widow or widower, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home. For more information, see Sale of Home, later.

You can check the "Yes" box in the Third Party Designee area of your return to authorize the IRS to discuss your return with your preparer, a friend, family member, or any other person you choose. This allows the IRS to call the person you identified as your designee to answer any questions that may arise during the processing of your return. It also allows your designee to perform certain actions. See your income tax package for details.

Your wages are subject to withholding for income tax, social security tax, and Medicare tax even if you are receiving social security benefits.

The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

The purpose of this publication is to provide a general overview of selected topics that are of interest to older taxpayers. The publication will help you determine if you need to file a return and, if so, what items to report on your return. Each topic is discussed only briefly, so you will find references to other free IRS publications that provide more detail on these topics if you need it.

Table I has a list of questions you may have about filing your federal tax return. To the right of each question is the location of the answer in this publication. Also, at the back of this publication there is an index to help you search for the topic you need.

While most federal income tax laws apply equally to all taxpayers, regardless of age, there are some provisions that give special treatment to older taxpayers. The following are some examples.

• Higher gross income threshold for filing. You must be age 65 or older at the end of the year to get this benefit. You are considered age 65 on the day before your 65th birthday. Therefore, you are considered age 65 at the end of the year if your 65th birthday is on or before January 1 of the following year.
• Higher standard deduction. If you do not itemize deductions, you are entitled to a higher standard deduction if you are age 65 or older at the end of the year. You are considered age 65 at the end of the year if your 65th birthday is on or before January 1 of the following year.
• Credit for the elderly or the disabled. If you qualify, you may benefit from the credit for the elderly or the disabled. To determine if you qualify and how to figure this credit, see Credit for the Elderly or the Disabled, later.

The IRS wants to make it easier for you to file your federal tax return. You may find it helpful to visit a Volunteer Income Tax Assistance (VITA), Tax Counseling for the Elderly (TCE), or American Association of Retired Persons (AARP) Tax-Aide site near you.

These programs provide free help for low-income taxpayers and taxpayers age 60 or older to fill in and file their returns. For the VITA/TCE site nearest you, contact your local IRS office.

For the location of an AARP Tax-Aide site in your community, call 1-888-227-7669. When asked, be ready to press in or speak your 5-digit ZIP code. Or, you can visit their website on the Internet at www.aarp.org/taxaide.

We welcome your comments about this publication and your suggestions for future editions.

You can write to us at the following address:

Internal Revenue Service 
Individual Forms and Publications Branch 
SE:W:CAR:MP:T:I 
1111 Constitution Ave. NW, IR-6526 
Washington, DC 20224

We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.

You can email us at *taxforms@irs.gov. (The asterisk must be included in the address.) Please put "Publications Comment" on the subject line. Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products.

Visit www.irs.gov/formspubs to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received.

Internal Revenue Service 
1201 N. Mitsubishi Motorway 
Bloomington, IL 61705-6613

If you have a tax question, check the information available on www.irs.gov or call 1-800-829-1040. We cannot answer tax questions sent to either of the above addresses.