“Death and taxes,” right? Benjamin Franklin’s 1789 use of the phrase led to centuries of common overuse when defining certainty.
Okay, so death truly cannot be avoided no matter how much or how little money you have. But when it comes to those over the age of 65, having to file your taxes isn’t as absolute. Although if you think once you retire you’ll automatically be free from filing a tax return, you may be disappointed.
Does age matter regarding filing taxes in Minneapolis, MN?
While age is definitely a factor, it’s not the only determinant of whether or not you need to file taxes once you hit age 65 in Minnesota. Your marital status and gross income go into the mix, too.
You can stop filing taxes at age 65 if:
- You are unmarried and your gross income is less than $13,850;*
- You are married, your spouse is at least 65 and your combined gross income is less than $27,000;* or
- You are married, your spouse is under 65 and your combined gross income is less than $25,700.*
That may seem fairly straightforward, but you know IRS tax rules are anything but simple. So let’s talk about what “gross income” means. Or, as you may be wondering …
Do I have to pay taxes on my Social Security benefits?
In a word, maybe. If you live on Social Security as your sole source of income, then your gross income equals zero. That definitely falls below a senior’s income threshold in Minneapolis, which means you don’t have to file a federal tax return.
However, if you have other taxable money coming in, then you have to calculate your gross income to see if you meet the IRS filing requirements. And that’s where it gets a little tricky, because you may need to include your Social Security benefits.
When is Social Security part of my gross income?
If you are married, reside with your spouse during the year and don’t live solely upon Social Security, then 85% of your benefits are considered to be gross income. To make it even trickier, a portion of your Social Security benefits are included in gross income if the total of half of your Social Security benefits plus all other income including any tax-exempt interest exceeds $32,000.* If you are not married, the threshold is $25,000.*
What about Minnesota state taxes?
Whether or not you have to file a federal income tax return in Minneapolis, you may still have to file your state income taxes. That’s because the rules for your state might be different than federal guidelines. If you’re uncertain whether or not you need to file a state tax return, check with your local Minneapolis, MN tax agency.
You can find a link to it at www.taxadmin.org/state-tax-agencies.
Where can I get help understanding filing taxes in Minneapolis, MN?
The IRS website offers an interactive tax assistant tool that can help you determine if you have to file a federal return. It will ask you a series of questions and generally takes less than 15 minutes to complete. Go to www.irs.gov/help/ita and click on “Do I Need to File a Tax Return?” If you’d like some guidance over the phone, call the IRS helpline at 800-829-1040.
Your Personal Financial Plan:
Taxes should be factored into your personal financial plan. If you have a 401k or another tax-deferred account such as an IRA, your taxable income may significantly increase once you reach age 72 because you will have to satisfy your required minimum distributions (RMDs). However, if plan ahead and create a personal financial plan, you can perhaps reduce your lifetime of taxes using sound tax strategies such as converting those dollars into a tax-free ROTH account over time. Proper tax planning may save you thousands during retirement and the earlier you start your plan, the more you may save.
True Vision Financial Advisors can help you figure out your taxes too.
Give us a call at (612) 712-7900 or enter your email into the form. Let’s talk through your personal situation so that you can get some clarity on your next steps. Whether you’re unsure about your taxes or you have questions about your finances, we can help you get on the right path.
*2019 tax year thresholds; income thresholds typically increase each year.
Disclosure: This information is not intended to be a substitute for specific individualized tax advice. We
suggest that you discuss your specific tax issues with a qualified tax advisor.