Simple Ways Seniors Can Cut Their Taxes

 

Getting older comes with its perks—more time, more flexibility, and in some cases, tax breaks. If you’re in or approaching retirement, it’s worth understanding the tax benefits available to seniors. These opportunities can help you keep more of your money and stretch your retirement income further. The catch? Many people miss out simply because they don’t know what to look for.

Common Tax Breaks Available to Seniors

Once you turn 65, the IRS provides a higher standard deduction. With the recently passed One Big Beautiful Bill Act, seniors can claim an additional deduction of $6,000.

Some seniors may also qualify for the Credit for the Elderly or Disabled, which can reduce your tax bill if your income is below certain thresholds. While not everyone qualifies, it’s worth checking if you meet the income and disability criteria.

Additionally, many states offer property tax exemptions or reductions for seniors. The rules vary by state and sometimes even by county, but these programs can significantly reduce your annual property tax bill.

Social Security benefits might not be taxed at all, depending on your combined income. If Social Security is your main or only source of income, your benefits could remain tax-free. However, if you have other income sources, up to 85% of your Social Security benefits may be subject to federal taxes.

Some seniors may also benefit from the Retirement Savings Contributions Credit (Saver’s Credit). Although less common among retirees, if you’re still earning income and contributing to retirement accounts like an IRA or 401(k), you might qualify for a tax credit worth up to 50% of your contributions, depending on your income.

Strategies to Maximize Tax Savings in Retirement

Tax relief for seniors isn’t just about deductions and credits, it’s also about smart planning. Here are a few strategies to consider:

  • Withdraw Strategically: Be mindful of when and how you withdraw funds from retirement accounts, such as traditional IRAs or 401(k)s. These withdrawals count as taxable income, and taking out too much in one year can bump you into a higher tax bracket.
  • Roth Conversions: Converting part of your traditional IRA to a Roth IRA can help reduce future taxable income since Roth withdrawals are tax-free in retirement. Spreading conversions over several years may help you manage taxes more effectively.
  • Qualified Charitable Distributions (QCDs): If you’re 70½ or older, you can donate directly from your IRA to a charity. The amount donated counts toward your required minimum distribution (RMD) but doesn’t count as taxable income.
  • Health Savings Accounts (HSAs): If you’re still working and eligible, contributing to an HSA provides tax-free savings for medical expenses, which can be significant in retirement. Even after you turn 65, you can continue using your HSA for medical costs tax-free.
  • Timing Social Security Benefits: Waiting to claim Social Security can not only increase your monthly benefit but also help you manage your taxable income in the early years of retirement. This can help avoid triggering higher taxes on Social Security or being subject to Medicare surcharges.
  • Track Medical Expenses: Seniors often have higher healthcare costs, and if these expenses exceed 7.5% of your adjusted gross income, they may be deductible if you itemize your taxes. Keeping good records of medical costs can lead to additional deductions.
  • Take Advantage of State-Level Benefits: In addition to federal tax relief, many states offer further benefits for retirees, such as exempting certain retirement income from taxation or providing additional property tax relief. Review your state’s tax codes or consult a financial advisor to ensure you’re not missing out.
Make the Most of Every Opportunity

Tax relief for seniors isn’t automatic. It takes some attention and planning to ensure you’re maximizing the benefits available to you. The right approach can help you keep more of what you’ve earned, support your lifestyle in retirement, and preserve wealth for future generations.

At Worth Advisors, we help you uncover the opportunities that fit your specific situation and build a strategy that keeps your retirement on track. If you’re ready to make sure your tax strategy is working as hard as you do, let’s connect.