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Tax Breaks For Retirees

Taxes can be a major drain on income in retirement, so it's important to take full advantage of every tax break available. Here are seven tax breaks retirees don't want to miss.

 

1. Higher Standard Deduction

When you file your tax return, you have the option of itemizing deductions or claiming the standard deduction. Itemizing involves claiming all of your actual expenses for things like medical expenses, state and local taxes, mortgage interest, and charitable deductions. The standard deduction is a fixed amount based on your filing status.

For people under age 65, the normal standard deductions on 2024 returns are $14,600 for single filers, $29,200 for married couples filing jointly and $21,900 for heads of household.1 But people age 65 or older get to claim a higher standard deduction.

For 2024 tax returns, the standard deduction for a single taxpayer 65 or older is $16,550. For married couples filing jointly, if both spouses are 65 or older, the standard deduction is $32,300, while it's only $30,750 if only one spouse meet the age threshold. If you file as head of household and are 65 or older, your standard deduction would be $23,850.2

If one or both taxpayers are 65 or older and blind, you qualify for an even higher standard deduction amount. The standard deduction chart in the IRS Instructions for Form 1040 can help you calculate the standard deduction available on your tax return.3

2. Dental and Medical Expenses

Healthcare costs are some of the biggest expenses people face in retirement. The silver lining is that some of these costs may be tax deductible.

To qualify, you have to itemize deductions on Schedule A.4 You can only deduct medical expenses that exceed 7.5% of your adjusted gross income (Line 11 of Form 1040-SR).5 However, deductible medical expenses include not only insurance premiums, payments to hospitals and doctors, and prescription medications, but also things like insulin supplies, home health aides, hearing aids and eyeglasses.

Don't forget to include the miles you drive for medical care. On your 2024 tax return, deductible medical expenses include 21 cents per mile when you are driving for medical purposes.6 For a complete list of deductible medical expenses, check out IRS Publication 502.7

 

3. Tax Credit for the Elderly or Disabled

The Credit for the Elderly or Disabled gives taxpayers ages 65 or older (or retired on permanent and total disability) a tax credit ranging from $3,750 to $7,500 per year depending on your filing status and total taxable disability income.8

To qualify, your income must fall below a set limit for your filing status. You can't claim the credit if one of these applies:9

  • Your adjusted gross income is $17,500 or more ($25,000 if married filing jointly and both spouses are 65 or older).
  • You received $5,000 or more of nontaxable Social Security or other nontaxable pension or disability benefits ($7,500 or more if married filing jointly and both spouses qualify for the credit).

You can claim the credit by completing Schedule R and filing it with your tax return.10

 

4. Selling a Home

Downsizing to a smaller home in retirement can reduce your monthly expenses and make it easier to maintain your home. Plus, if your home has increased in value since you purchased it, selling it can give you tax-free income.

If you've owned and lived in the home for at least two out of the last five years, the first $250,000 of profit is tax-free.11 For married couples filing jointly, the tax-free amount doubles to $500,000.

 

5. Charitable Donations and Volunteer Experiences

If you itemize deductions, you can also deduct contributions made to qualified charitable organizations. This includes cash donations, as well as non-cash contributions, such as used clothing and household items.

Don't forget to track the miles you drive while volunteering. Your deduction for charitable donations can include 14 cents per mile for such work.6

 

6. IRA Contributions

Many retirees continue working part-time in retirement, either because they enjoy working or want to have enough money to enjoy retirement long into the future.

Working people ages 50 or older can contribute up to $8,000 to an IRA for 2024.12 Previously, contributions to traditional IRAs weren't allowed after age 70, but the SECURE Act removed those age restrictions.12 The SECURE Act increased the age at which individuals must start taking required minimum distributions to 73 (if you reached age 72 after December 31, 2022).13

This means a working person over the age of 73 could potentially be contributing to an IRA while simultaneously required to take out minimum distributions in the same year.

Roth IRA contributions aren't deductible, but you may be able to deduct contributions to a traditional IRA, depending on your income and whether you are covered by a retirement plan at work.14

 

7. Investment Contributions

Before the Tax Cuts and Jobs Act of 2017 (TCJA), taxpayers who itemized on Schedule A could deduct various investment expenses — such as investment management fees and financial planning fees — as miscellaneous itemized deductions. Miscellaneous itemized deductions also included things like unreimbursed job expenses and tax preparation fees.

The TCJA eliminated most miscellaneous itemized deductions, but you can still deduct investment interest expense on Line 9 of Schedule A.15 Investment interest expense is interest paid on money borrowed to purchase taxable investments (like real estate), and it includes margin loans for buying stocks in your brokerage account.16 The amount you can deduct is capped at your net taxable investment income for the year, which includes things like taxable interest, dividends, capital gains, rent and royalty income, and non-qualified annuities.17

Talk with a tax professional to ensure you're getting the most out of your available deductions.

Still saving for the future after you've already retired? The SECURE Act removed age restrictions for contributing to a traditional IRA.

Important disclosure information

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

  1. IRS.gov, "IRS provides tax inflation adjustments for tax year 2024," updated October 15, 2024. Accessed March 24, 2025.

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  2. IRS.gov, "Publication 554 (2024), Tax Guide for Seniors," updated January 7, 2025. Accessed March 24, 2025. Back
  3. IRS.gov, "1040 and 1040-SR Instructions," published December 16, 2024. Accessed March 24, 2025. Back
  4. IRS.gov, "Schedule A, Itemized Deductions," accessed March 24, 2025. Back
  5. IRS.gov, "Form 1040-SR U.S. Tax Return for Seniors," accessed March 24, 2025. Back
  6. IRS.gov, "Standard mileage rates," updated January 2, 2025. Accessed March 24, 2025. Back
  7. IRS.gov, "Publication 502," published November 18, 2024. Accessed March 24, 2025. Back
  8. IRS.gov, "Credit for the elderly or the disabled at a glance," updated August 19, 2024. Accessed March 24, 2025. Back
  9. IRS.gov, "2024 Instructions for Schedule R," updated December 18, 2024. Accessed March 24, 2025. Back
  10. IRS.gov, "Schedule R, Credit for the Elderly or the Disabled," accessed March 24, 2025. Back
  11. IRS.gov, "Topic no. 701, Sale of your home," updated February 25, 2025. Accessed March 24, 2025. Back
  12. IRS.gov, "Retirement topics - IRA contribution limits," updated August 20, 2024. Accessed March 24, 2025. Back
  13. IRS.gov, "Retirement plan and IRA required minimum distributions FAQs," updated March 13, 2025. Accessed March 24, 2025. Back
  14. IRS.gov, "IRA deduction limits," updated August 2, 2024. Accessed March 24, 2025. Back
  15. U.S. News & World Report, "3 Tax Deductible Investment Expenses," published March 8, 2019. Accessed March 24, 2025. Back
  16. IRS.gov, "Publication 550, Investment Income and Expenses," published February 14, 2025. Accessed March 24, 2025. Back
  17. IRS.gov, "Find out if net investment income tax applies to you," updated January 17, 2025. Accessed March 24, 2024. Back