Free Tax Preparation Resources & Help for Seniors

Just like everyone else, seniors must file their taxes if their income exceeds certain limits. However, this isn’t to say that all seniors must file taxes.

Whether you need to file depends on your finances, government benefits and other contributing factors — but not your age.

Once you exit the workforce, you will no longer owe payroll taxes — but you may still be subject to income taxes at the federal or state level.

Others may need to navigate IRS rules related to retirement account withdrawals, annuities or pension payments.

It’s important to understand the impact of taxes on your retirement to ensure you have a well-structured retirement plan.

Below are some additional questions that older adults should ask themselves around tax time.

An estimated 56% of retirees will owe federal income taxes on their Social Security benefits between 2015 and 2050, according to the Social Security Administration. But if Social Security is your only income, your gross income equals zero, so there’s no need to file a federal income tax return.

But if you earn any other income — such as from a part-time job or retirement account distributions — some of your Social Security benefits may be taxable.

If half of your annual Social Security benefits plus all other income exceeds $25,000, or $32,000 for married couples filing jointly, then a portion of your Social Security benefits are included in your gross income.

However, there are some states that don’t tax Social Security at all. If you’re planning on moving soon, consider looking into the best states to retire tax-wise.

There isn’t a legal number of years you can go without filing taxes. You should always strive to file your taxes in a timely manner. You could face failure-to-pay penalties, interest from the IRS and potential jail time if you don’t file your taxes.

Each type of retirement account is taxed differently. Some investments are purchased with after-tax dollars while others are pre-tax, which affects taxation rules.

Learn how IRAs, 401(k)s, annuities, investment incomes and pensions are taxed to have a better understanding of how much you could potentially owe.

Most people will pay some tax when they withdraw money from their retirement accounts.

Distributions from traditional IRA, 401(k), 403(b) or 457 plans are taxed as ordinary income — like income from a job — according to your current tax bracket.

Distributions from traditional 401(k) and <a href="IRA accounts are taxed on an incremental basis. You can begin withdrawing money from your traditional 401(k) or IRA without penalty once you turn 59 1/2.

You are forced to start taking required minimum distributions from your traditional retirement accounts when you’re 72 and retired.

Withdrawals from Roth IRA and Roth 401(k) plans are different. Distributions are typically tax-free in retirement as long as the account is at least five years old.

An annuity is taxed when you withdraw money from the account or receive regular payments.

Annuities purchased through a traditional 401(k) or IRA are considered qualified annuities. Payments from a qualified annuity are fully taxable as ordinary income.

One exception is if you purchased an annuity inside a Roth IRA or Roth 401(k) plan. Because the annuity is purchased with after-tax dollars, payments you receive in retirement are tax-free.

If you purchased an annuity on your own with after-tax dollars, then typically only the earnings or interest is taxed.

Annuity taxation can be complex, but to summarize, if you buy an annuity with pretax money, the entire balance is taxable as income. If you used after-tax funds to purchase the annuity, then only the earnings are taxable.

Just like before retirement, you’ll owe taxes on investment dividends, interest and capital gains after you leave the workforce.

Investment income is reported on a 1099 tax form each year.

Interest on investments in taxable brokerage accounts is taxed at your regular income tax rate. So are short-term capital gains, or investments sold a year or less after purchase.

But other investment income — including your long-term capital gains and qualifying dividends — are taxed at the capital gains rate. This ranges between 0% to 20%, depending on your tax bracket.

You must pay income tax on pension payments for the year you received the money.

According to the Financial Industry Regulatory Authority, your former employer will withhold some taxes from your pension payments, so at least some of what you owe will already be prepaid.

Retirees with high amounts of monthly pension income will likely pay taxes on 85% of their Social Security benefits.

Make sure to check the pension taxation rules in your state. Some states don’t tax pension payments, but others do.

You can also use a tool from the IRS to determine if your pension payment, annuity from an employer-sponsored retirement plan or nonqualified annuity is taxable.

The United States uses a progressive tax rate that consists of seven tax brackets. The brackets apply only to the amount of taxable income that remains after subtracting any deductions and exemptions that you’re entitled to claim.

The tax rates gradually increase across the seven tiers, with high-income earners paying higher tax rates.

Christie Tornikoski, AFC®, founder of Spire Financial Consulting LLC, provided context on tax rates in retirement.

“It’s incremental,” Tornikoski told RetireGuide. “As the money goes up, a higher tax rate is applied.”

For example, if your taxable income is $29,450, the entire amount isn’t taxed at 12%.

Rather, you would pay 10% of $11,000 in the first tax bracket, then 12% on the remaining taxable income in the second tax bracket.

“However, what you actually owe the IRS may be much lower if you requested your part-time employer or the Social Security Administration to withhold earnings,” Tornikoski said.

“The first step is to calculate how much of your Social Security benefit is taxable.”

Remember, up to 85% of your Social Security income may be taxable, but depending on your overall income, you may not owe taxes on it.

You can figure this out by adding up your other source of income and using 50% of your Social Security benefits in your calculation. The IRS provides an online tool to help you determine how much of your Social Security benefits are taxable.

Once you determine potential Social Security taxes, you’ll need to consider your other forms of income to see which tax bracket you fall into.

The IRS allows you to chip away at your final taxable income with either the standard deduction or itemized deductions.

If you take the standard deduction — and most people do — your taxable income decreases by $13,850 if you’re a single filer and by $27,700 for married couples filing jointly in 2023.

Being a senior comes with perks — including at tax time. Everyone 65 and older automatically qualifies for a $1,850 boost to the standard deduction. If you’re legally blind or permanently disabled, you qualify for more, according to Kiplinger.

If you already collect Social Security but are still working after retirement and earning income, a portion of your benefits may be taxed.

Whether you owe income tax on your benefits will depend on how much overall retirement income you and your spouse receive, and whether you file joint or separate tax returns.

A formula, known as combined income, determines the amount of your Social Security check that’s taxable.

Typically, the higher your total income amount, the greater the taxable part of your benefits.

If your combined income is less than $25,000 for an individual, then your Social Security benefits aren’t taxable.

However, for individuals with a combined income between $25,000 and $34,000, up to 50% of benefits may be taxable.

If your combined income exceeds $34,000, up to 85% of your benefits are taxable.

If you file a joint return, you’ll face higher combined income limits.

Navigating your taxes after retirement can be challenging. Filing a return can take hours and tax laws are always changing.

Luckily, several free resources across the country are available to help.

If you need assistance navigating complex tax rules, you can take advantage of free preparation and advice from the IRS, the AARP Foundation and other organizations.

The Tax Counseling for the Elderly, or TCE, program from the IRS provides free tax assistance specifically tailored to people 60 and older.

No application is required to receive tax help at a TCE site, but most locations require an appointment.

While the program is operated by the IRS, community and nonprofit organizations across the country administer the program at the local level.

Volunteer Income Tax Assistance, or VITA, is another federal grant program that offers free tax help from IRS-certified volunteers.

This program shares similarities with TCE but helps a wider group of people.

The program is generally available to taxpayers who make $60,000 or less a year, people with disabilities and taxpayers who speak limited English.

Help is provided at community and neighborhood centers, libraries, schools, shopping malls and other accessible locations. The IRS also offers a publication on what to expect during your VITA or TCE appointment, as well as which documents to bring with you.

About 70% of taxpayers qualify to file free federal tax returns online through the IRS Free File system, according to an article from CNBC.

This public-private partnership connects single filers and families with an annual income of $73,000 or less with free filing software from partners such as TaxAct and TurboTax.

You can use the IRS Free File Online Lookup Tool to refine the offers you may qualify for, or you can select the “Browse All Offers” option.

Once you make a selection, you will be redirected to the tax provider’s website.

AARP Tax Aide is a free national program that provides in-person and virtual tax assistance from Feb. 1 through April 15. Each site is staffed by IRS-certified volunteers.

The program caters to taxpayers who are age 50 or older and those with low to moderate incomes.

However, anyone can make an appointment. You don’t have to be an AARP member to get free tax help.

In addition to assisting you with your federal return, AARP tax experts can help you prepare state tax returns for the state in which the site is located.

However, AARP Tax Aide volunteers can’t help with every tax issue.

To find a location near you, visit the Tax Aide Locator Tool and review a list of documents to take with you.