Elderly taxpayers have many Indiana tax advantages available to them. First, an elderly taxpayer must determine whether or not they are required to file an annual income tax return. The first step in determining whether an individual needs to file an Indiana return is to determine his or her residency status for the year. A taxpayer is considered a full-year resident if the taxpayer maintained a legal residence in Indiana for the entire year. A taxpayer does not have to be physically present in Indiana the entire year to be considered a full-year resident. If the taxpayer is a resident and the total value of personal, elderly, and blind exemptions exceeds the taxpayer’s federal adjusted gross income before deductions, the taxpayer does not have to file an annual income tax return. If the taxpayer is not required to file but has withholding for Indiana state and local taxes, the taxpayer may file a return to claim a refund for taxes withheld.
Indiana allows:
- A $1,000 exemption for each exemption claimed on the federal return;
- A $1,500 exemption for certain dependent children;
- A $1,000 exemption for the taxpayer and/or spouse if they are age 65 or over;
- A $1,000 exemption for the taxpayer and/or spouse if they are blind; and
- A $500 additional exemption for each individual age 65 or older if their federal adjusted gross income is less than $40,000.
A taxpayer who is at least 62 years of age by the end of the taxable year, or the taxpayer’s surviving spouse regardless of age, may be allowed a deduction from adjusted gross income equal to the first $8,000 received during taxable year 2015 and $16,000 for taxable year 2016 and thereafter from a federal civil service annuity included in adjusted gross income. This deduction must be reduced by the total amount of any Social Security benefits and railroad retirement benefits received during the taxable year.
Military Retirement Pay Adjustment
A taxpayer who is at least 60 years of age by the end of the taxable year, or the taxpayer’s surviving spouse, may qualify for a military retirement pay deduction. This deduction is limited to the first $5,000 of retirement or survivor’s benefits received during the taxable year by the individual or the individual’s surviving spouse for service in an active or reserve component of the armed forces.
Homeowner’s Residential Property Tax Deduction
A taxpayer is eligible for an income tax deduction equal to the lesser of $2,500 or the amount of property taxes that are paid during the taxable year in Indiana by the individual on the individual’s Indiana principal place of residence.
Renter’s Income Tax Deduction
A taxpayer is eligible for an income tax deduction if the taxpayer rents a dwelling for his principal place of residence. The deduction is equal to the lesser of the amount of rent actually paid or $3,000.
Disability Retirement Deduction
An individual who retired on disability and was permanently and totally disabled is entitled to a deduction from adjusted gross income. For further information, see Information Bulletin #70, available here.
Unified Tax Credit for the Elderly
An individual is eligible for the Unified Tax Credit for the Elderly if the individual meets all of the following requirements:
- The taxpayer and/or spouse must be at least 65 years of age by the end of the taxable year.
- The taxpayer and spouse must file a joint return if they lived together at any time during the taxable year.
- The federal adjusted gross income must be less than $10,000.
- The qualifying taxpayer and/or spouse must have been a resident of Indiana at least six months during the taxable year.
Contact your Somerset advisor if you qualify for any of these deductions and credits. We would love to hear from you.
