Mark Shalloway a certified Elder Care Attorney, who specializes in elder law in West Palm Beach, Florida is no stranger to the vagaries of tax law as it applies to estates, children receiving gifts, and to the elderly. Within the State of Florida, the implications of tax liabilities for transferring estates and receiving inheritances are many.
Mr. Shalloway explains some of the issues many families face as they transfer wealth by bequeathing assets or care for the elderly:
“We have noticed a major increase in concern among people under 55 caring for their elder loved ones. One of the areas my firm has received the most inquiries in is inheritance taxation since the passage of the Affordable Care Act by President Obama.”
For those interested in tax credits, the implications are many, especially in the Sunshine State.
There are various programs and laws that benefit elderly taxpayers. One in particular is a direct federal tax credit that includes a provision allowing one who supports an elderly person to claim as a dependent, but this article focuses on the provisions that directly benefit the elderly and disabled.
Identifying the correct Federal tax form is the first step, before discussing the Elderly and Disabled Credit. The IRS provides several alternative tax forms, one of which must be filed with the IRS each year by those with sufficient income:
1040EZ- Is generally used by individuals filing as “single” or “married filing jointly,” claiming no dependents. Such individuals generally have taxable income of $50,000 or less only from wages, salaries, tips, taxable scholarships or grants, unemployment compensation or certain dividends-with no more than $1,500 in interest income and having not itemized deductions or credits.
1040A- The 1040A is generally used by many who don’t qualify for filing Form 1040EZ. This includes taxpayers who generally have taxable income of $50,000 or less. However, this figure also includes income from additional sources and does not allow itemized deductions. Yet, unlike 1040EZ, it allows certain “adjustments to income” and “credits” (including credit for the elderly or disabled).
1040 – The 1040 provides the most opportunities for tax deductions and permits listing tax credits and income adjustments. With the 1040 there is no income limitation and must be used if there are certain types of income, such as self-employment, unreported tips, partnership distributions, capital gains distributions, or foreign trust distributions. In addition, it must be used if the taxpayer had a foreign bank and or securities account with a combined value of over $10,000.
In order to qualify for the Tax Credit the taxpayer must be a citizen or resident, have adjusted gross income or nontaxable social security and pension income below specified amounts depending on filing status. The taxpayer must be 65 years or older at the end of the tax year for which the credit is claimed, or under 65, but retired and on permanent and total disability income for the tax year for which the credit is claimed.