Tax Breaks That Let Older Americans Pay Less Taxes

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Seniors have several ways to lower taxable income and pay less taxes than others not in the same age range. These tax breaks enable them to keep more money in their pockets when they are no longer in the workforce or only part-time.

While some senior benefits are available to reduce taxes if you are over 50, many more are accessible after they reach 65. Here is a look at several benefits that can help you reduce taxes.

Take the Extra Standard Deduction

If you are 65 or older, you can reduce taxes by claiming an extra standard deduction. Although you can already claim the standard deduction, you can also claim an extra tax deduction for over 65.

The 2023 standard deduction—for tax forms filed in 2024—can be claimed by anyone. If you do not itemize, singles and those who are married but filing separately can claim a deduction of $13,850. Those who are married and filing jointly and qualified widowers can claim a standard deduction of $27,700. The heads of households can claim $20,800.

Older Americans at least 65 qualify for an extra standard deduction. Kiplinger says that on your 2023 taxes, singles or heads of household qualify for an additional $1,850. Married people filing separately or jointly qualify for an extra $1,500.

People 65 or older and blind also get a special extra standard deduction. Blind individuals get an additional $1,500, but if you are 65 and older and blind, you can receive an extra $3,000 per person.

Every year, the extra standard deduction for seniors 65 or older is adjusted for inflation. Your 2024 taxes—which you will file in 2025—have already been revealed. Kiplinger says that singles will get $1,950, and married persons will get $1,550 per person. People 65 and older and blind will get $3,100 per person.

Contribute More to Your Retirement Accounts

After you turn 50, you can contribute more to a retirement account—called catch-up contributions. If you put money into a traditional individual retirement account (IRA) or a 401(k), all contributions are tax deductible up to the contribution limit. Any contributions to a Roth IRA or a Roth 401(k) are after-tax.

Employees 50 or older can make a $1,000 annual catch-up contribution to their IRA. People who are working, are 50 or older, and have a 401(k), can make catch-up contributions of $7,500 annually.

Starting Jan. 1, 2025, CNN says seniors 60, 61, 62, and 63 can make even larger catch-up contributions to their 401(k)s. Annual contribution limits will be raised by another $3,500, enabling them to add $14,000 over the four years. People with an income more than $145,000 will need to make all contributions to a Roth account, which means they will have to pay taxes on that money before putting it into their retirement account.

Write Off Your Health Expenses

If you are self-employed, which Medicare defines as an independent contractor, a partnership running a trade or business, or having your own business, you can deduct the costs of Medicare parts A, B, D, and any Medigap plans. You may also be able to deduct any co-insurance costs, deductibles, and co-payments if the total expenses exceed 10 percent of your adjusted gross income (AGI).

You may also be able to deduct some of your medical expenses if you itemize. SeniorLiving says you can deduct any medical costs that exceed 7.5 percent of your AGI. Most non-elective procedures, including dental and vision, can be included if you itemize, but the total of your itemized expenses must be greater than the standard deduction. Most people would only be able to use the standard deduction unless they have many medical costs.

Get and Max Out Your Health Savings Account

A health savings account (HSA) enables you to reduce your medical costs, get a tax deduction for your contributions, and save for retirement. The AARP mentions that once you reach 55, you can make catch-up contributions of $1,000, which are also tax deductible. After you get enrolled in Medicare, you cannot make any more contributions to an HSA.

Required Minimum Distributions

Before 2023, the age at which you must take required minimum distributions (RMDs) was 72. It was changed at the start of last year, letting you wait until you are 73. It also means that your RMDs will be larger than ever—and so will taxes on withdrawals from traditional IRAs and 401(k)s. Roth accounts no longer have RMDs.

Reduce Taxes Through Charitable Contributions

If you have RMDs that you do not want or that will put you into a higher tax bracket, you may want to make a charitable contribution from your IRA. A qualified charitable distribution (QCD) can be made directly (it cannot come from you) to an approved charity from your retirement account, and you will not have to pay taxes on that amount. The amount of your QCD counts as part of your RMD. If you do not take an RMD when required, you will lose 25 percent of the money you should have withdrawn.

When your income places you in the 24 percent bracket, giving just $10,000 to a charity means you save $2,400 in taxes. A $50,000 QCD lets you save $12,000 in taxes. NerdWallet says you can donate up to $100,000 (couples can donate up to $200,000) to a qualified charity per year and get a tax deduction for it. It may also enable you to avoid having to pay Medicare surcharges.

Senior citizens can use the above methods and more to lower taxable income. Consulting with a financial advisor or estate planner can help you take advantage of the financial tools you need to keep more money and let you enjoy your retirement years even more.

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