Sunday, December 27, 2009

Georgia state income tax exemption for seniors

This may apply in other states as well but I am more familiar with Georgia and offer this advice to help seniors obtain as much relief as possible from excess taxation.

Georgia has a clause in the tax code that allows seniors over 62 years of age to claim an income exemption up to $35,000 (2008 tax year) on their income tax returns. The exemption applies to income obtained for retirement such as interest, dividends, payments from IRAs or pension plans. If a married couple files jointly it is possible to claim an income exemption up to $70,000 for the 2008 tax year.

The income has to be defined for each person, so there is a catch here if the couple has all their accounts under a single name, or jointly, then the amount of retirement type income for one spouse may not be enough to claim the full exemption. So check your bank accounts and mutual funds etc to make sure that you can claim the maximum exemption by having the person with least pension type income listed as the main owner on the accounts.

For example if a husband is being paid a pension and also taking payments from an IRA and receiving interest and dividends his income will probably be over the $35,000 maximum and so he can claim the full exemption.

If the wife does not have a pension or an IRA payment and both husband and wife are listed on the bank accounts or mutual funds then the interest or dividends will be split between them. In this case, the wife's income which may only be interest or dividends or social security may not reach the full amount of the exemption and so the couple will not be able to claim the full $70,000 exemption.

If her name is the primary owner on bank accounts or mutual funds then it may be possible to show her as the recipient of the income and that way maximize the exemption. Check with your CPA or tax preparer to make sure that the correct amount of interest and dividend income is being assigned to the spouse who has the least pension income. This may mean changing the name on the account and everyone will have to decide if they feel comfortable doing that.

If you use turbotax or another software package to prepare your taxes, check the assignment of the boxes on interest and dividend income to make sure that you have identified the ownership of the accounts properly to claim the maximum exemption.

See form IT-511 page 12 of the Georgia tax instructions at----

1 comment:

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