This blog post was updated on December 5, 2024.
While the new tax season isn’t here yet, it will be approaching before we know it, and if you're retired, you might feel overwhelmed by the thought of filing your taxes. Deadlines, forms, and financial jargon can make anyone dread this time of year. But don’t worry—tax deductions for seniors are available, and they’re easier to navigate than you might think.
The IRS provides several deductions specifically for seniors, though not everyone is aware of them. Knowing the current standard deduction and understanding other federal and state deductions can help you or your loved one maximize income and make sound financial decisions for retirement. Plus, you might discover extra savings that could be used towards your senior living expenses.
Next, we’ll dive into the top 10 tax deductions for seniors and how to make the most of them:
1. Increased Standard Deduction
If your taxes are straightforward—meaning you’re not a small business owner or don’t itemize complex deductions—you likely take the standard deduction. Once you’re 65 or older, the standard deduction increases.
For the 2024 tax year (filed in 2025):
- Single or married filing separately: $15,00
- Married filing jointly or qualifying widow(er): $30,000
- Head of household: $22,500
If you have a condition such as blindness, you can increase your standard deduction by $1,600 (or $2,000 if filing as single or head of household). This deduction is a great option for eliminating the need to itemize, making the process much simpler.
2. Higher Filing Threshold
The filing threshold is the minimum income you must earn before you’re required to file a tax return. This threshold increases after age 65.
For example:
- Single filers under 65: Must file when income exceeds $13,850.
- Seniors 65+: Must file when income exceeds $15,700.
- Married seniors 65+ (joint filers): Must file when combined income exceeds $30,700.
If your primary income comes from Social Security or a pension, you may not need to file a return at all, saving time and stress during tax season.
3. Social Security Tax Exemption
For many seniors, Social Security benefits are not taxable. Here’s how it works:
- Single filers: If your total income (including half of your Social Security benefits) is below $25,000, you won’t pay taxes on those benefits.
- Married couples filing jointly: If combined income is under $32,000, Social Security is not taxed.
If you exceed these thresholds, you may have to pay taxes on 50-85% of your benefits, but many seniors will owe little or no taxes on Social Security.
4. Business and Hobby Deduction
Some seniors turn hobbies into businesses after retirement, selling handmade crafts or consulting as freelancers. If this applies to you, you’ll need to pay taxes on your earnings—but you can also take advantage of several deductions:
- Advertising (business cards, website)
- Supplies (craft tools, office equipment)
- Home office expenses
- Professional education (courses, books)
These deductions help offset any tax liability on your business income.
5. Medical Expense Deduction
Healthcare costs can quickly add up for seniors, but many of these expenses are tax deductible. If you itemize your deductions, you can claim medical expenses that exceed 7.5% of your adjusted gross income. Deductible expenses include:
- Doctor and dentist visits
- Prescription drugs
- Hearing aids, glasses, and medical devices
- Health insurance premiums (excluding Medicare Part B)
- In-home care and certain senior care services
If you or a family member are providing caregiving services, there may be tax implications to consider—be sure to consult with a tax professional.
6. Elderly or Disabled Tax Credit
If you’re over 65 or permanently disabled, you may qualify for the elderly or disabled tax credit. This credit reduces the total amount you owe to the IRS and can lead to a refund if it exceeds your tax liability.
To qualify, your adjusted gross income and nontaxable Social Security must fall below specific limits (e.g., $25,000 for single filers). Consult a tax advisor to see if you’re eligible.
7. Charitable Deductions ❤
If you donate to charity, you can deduct the value of your donations from your taxable income. You can deduct up to 60% of your adjusted gross income for charitable contributions, whether it's cash donations or physical items like clothing and household goods.
To maximize this benefit, keep detailed records of your donations and consult a tax planner for more complex contributions, such as establishing a charitable foundation.
8. Retirement Plan Contribution Benefits
If you continue working past retirement age, you may still contribute to retirement plans like IRAs or 401(k)s, which can lower your taxable income. You may also qualify for a saver’s credit, which provides additional tax breaks on retirement plan contributions.
For filing taxes in 2025, individuals may contribute up to $7,000 to a traditional or Roth IRA if they are 50 or older, and the saver’s credit can offset up to $1,000 in taxes.
9. Estate and Gift Tax
In 2025, the estate tax exemption is $14 million ($26 million for married couples), meaning most people won’t have to worry about estate taxes. However, if you’re thinking of leaving significant assets to heirs, you should also know about the annual gift tax exclusion. You can gift up to $17,000 per person without facing tax penalties.
10. State Senior Tax Exemptions
Each state has its own tax rules for seniors, and many offer exemptions on Social Security income or retirement benefits. For example:
- Florida and Nevada: No state income tax.
- South Carolina: Exempts Social Security benefits and allows seniors to exclude up to $10,000 in retirement income.
- Delaware: Offers low property taxes, making it easier to live on a fixed income.
Research your state’s specific tax benefits to ensure you’re taking advantage of any available exemptions.
Tax season doesn’t have to be overwhelming. By understanding the deductions and credits available for seniors, you can reduce your tax liability and keep more of your hard-earned money. Whether it’s increasing your standard deduction or taking advantage of charitable contributions, these strategies can make a significant difference in your financial planning.
Pro Tip: Consider working with a tax professional who specializes in senior taxes. Our experienced financial team at The Arbor Company can help you locate the contacts and resources you need to navigate this tax season with confidence. They’ll ensure you get every deduction and credit you’re entitled to, and they can help you navigate more state-specific exemptions.
Ready to explore how tax savings can impact your retirement plans? Let’s get started! Give us a call at (404) 237-4026.
This blog was updated in December 2024.
