Tax Breaks for Seniors: Maximizing Retirement Income

This comprehensive guide provides seniors with the essential information needed to leverage tax breaks effectively to maximize retirement income.

Askia Roberts
May 15, 2024

1. Standard Deduction for Seniors

Seniors aged 65 and older are entitled to a higher standard deduction. For 2024, this deduction increases by $1,700 for single filers and $1,350 per individual for married couples filing jointly if at least one spouse is 65 or older.

Practical Tips:

  • Ensure that you report your age accurately on your tax forms to automatically receive this increased deduction.
  • Compare the potential benefits of itemizing deductions versus taking the increased standard deduction.

Qualifying Information:

  • You must turn 65 by the end of the tax year.
  • Provide proof of age through government-issued ID when filing taxes.

2. Tax Credit for the Elderly or Disabled

This credit is aimed at taxpayers aged 65 or older, or those permanently disabled, offering a reduction in tax liability by up to $1,125 based on income and filing status.

Practical Tips:

  • Consult with a tax advisor to determine eligibility, as income limits and other criteria can be complex.
  • Maintain documentation of disability from a medical professional if under 65.

Qualifying Information:

  • Income thresholds apply: $17,500 or less for single filers, $20,000 or less for married filing jointly with one qualifying individual, and $25,000 or less for both spouses qualifying.

3. Medical and Dental Expenses

Seniors can deduct unreimbursed medical and dental expenses exceeding 7.5% of their adjusted gross income.

Practical Tips:

  • Keep meticulous records of all medical and dental expenditures.
  • Include transportation costs to medical facilities as part of your medical deductions.

Qualifying Information:

  • Expenses must exceed 7.5% of adjusted gross income.
  • Only unreimbursed expenses are deductible.

4. Investment Income Management

Seniors can benefit from lower tax rates on qualified dividends and long-term capital gains. Keeping taxable income low can also reduce the tax on Social Security benefits.

Practical Tips:

  • Consider timing the sale of assets to manage your income bracket.
  • Use retirement account withdrawals strategically to balance income.

Qualifying Information:

  • Monitor income levels to maintain eligibility for lower tax rates.

5. Charitable Contributions

Seniors can deduct charitable contributions, including cash and property donations, directly impacting their taxable income.

Practical Tips:

  • Donate directly from an IRA to exclude the donation from taxable income (Qualified Charitable Distribution).
  • Keep detailed records and receipts for all donations.

Qualifying Information:

  • Contributions must be made to qualified organizations.
  • Special rules apply for donations from IRAs for those aged 70½ or older.

Legal Disclaimer: This guide is provided for informational purposes only and should not be construed as tax advice. Tax laws and regulations are subject to change, and individual circumstances may vary. Consult with a qualified tax professional or advisor to address your specific tax situation and compliance requirements.

To schedule your consultation, please use my Calendly link.

Best Regards,

Askia Roberts, CPA

RTW Advisors