How to Identify Tax Traps For Older People

As we age, most of us survive on a lower income. That is why it is imperative that we identify tax traps that can cause problems for seniors. Whether we are doing so for ourselves or perhaps for our aging parents or grandparents, we can find ways to navigate the troubled tax waters. Use these steps as a guide.

Difficulty: Challenging

Instructions

1. Hire a financial planner before you get to retirement age. You've heard the old adage, "An ounce of prevention is worth a pound of cure." Well, no advice could be sounder when it comes to financial planning for seniors. If you wait until old age arrives, it can often be too late.

2. Buy an IRA (individual retirement account) and know the tax rules related to withdrawal. IRAs are wonderful ways to save money for retirement, but if you do not follow the rules regarding early withdrawal, you can get hit with a huge tax problem.

3. Be aware of exorbitant property taxes if you move to a retirement community in a resort-type area. For many, the allure of moving to such an area is understandable, but in several such areas, the property taxes are astronomical.

4. Do your homework and do it early. To save the most on taxes and identify potential traps, you need to stay on top of your game. There are tons of opportunities to shave your tax bill by finding hidden deductions and expenses that you can write off, but you have to do it before December 31.

Resources

• Avoiding year-end tax traps: making the right moves before December 31 can shave thousands off your bill to Uncle Sam - Tax Planning.
• Seniors Get Caught in Tax Trap.