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For senior citizens and retirees, wealth management and protection are essential. One key part of this process is ensuring you make the most of the many available tax deductions for seniors. Along with tax credits and other useful strategies, income tax deductions for seniors can save hundreds or thousands of dollars on your annual tax bill. In this guide, we’ll explain tax deductions for retirees and seniors.
Key Takeaways
- There are many tax benefits and deductions for seniors to save money on their income taxes.
- In addition to tax deductions, seniors are eligible for unique tax credits and exemptions.
- Accounting software can help retirees and seniors track tax-deductible expenses throughout the year.
Table of Contents
- 10 Tax Deductions for Seniors
- Streamline Your Tax Preparation With FreshBooks
- Frequently Asked Questions
10 Tax Deductions for Seniors
For federal tax purposes, a senior is a single filer aged 65 or older. Seniors may file Form 1040 or 1040-SR. Form 1040-SR is available to you if you were born before January 2, 1960 (for the tax year 2024).
Senior citizens and retirees should be considering the below deductions throughout the tax year to save as much as possible on their tax return.
1. HSA Contribution Deductions
If you’re enrolled in a health savings account, or HSA, you can deduct all contributions to the plan (including those that are deducted from your payroll and any additional contributions you make) from your federal tax return. This is a great option for people who are nearing or entering retirement, as HSAs allow you to make tax-free withdrawals for medical expenses.
2. Higher Standard Deductions
If you are a senior citizen (65 or older) and choose to take the IRS standard deduction rather than itemizing your tax write-offs for the year, you can claim a higher standard deduction. Along with the 2024 tax year’s regular standard deduction of $14,600 for single filers, seniors and those who are blind can claim an additional standard deduction of $1,950. Additionally, for widowed taxpayers, you may file as a qualifying surviving spouse and use joint return tax rates for 2024 if you meet certain criteria.
3. Higher Tax Filing Threshold
If you are 65 or older, you can earn more in gross income than younger taxpayers before being subject to income tax. Seniors can earn up to $15,700 per year before being required to file a tax return—this is $1,850 more than younger workers. It should be noted, however, that you’ll still need to file if you want to claim any tax credits or to be refunded withheld income tax.
4. Tax Credit for the Elderly or Disabled
Though not a deduction, this tax credit can be a big help for seniors and people with disabilities. The Credit for the Elderly or the Disabled offers between $3,750 and $7,500. To be eligible for this credit, you must be 65 or older, be retired on permanent and total disability, receive taxable disability income, and receive income under specific limits.
5. Retirement Plan Contribution Benefits
If you make contributions to a traditional Individual Retirement Arrangement (not a Roth IRA), a 401(k) plan, or other similar retirement accounts, you can generally deduct your contributions from your taxable income. Different plans have different contribution limits, so consider these when planning your contributions and deductions for the year. For 2020 and later, there is no age limit on making regular contributions to traditional or Roth IRAs.
If you’re looking for a way to make tax prep for seniors simpler, FreshBooks is here to help. Check out our tax preparation guide and our breakdown of FreshBooks Accounting below.
6. Property Tax Exemptions
In many cases, senior citizens, as well as veterans and people with disabilities, qualify for a property tax exemption. This is a set amount that is subtracted from your federal income tax bill. The amount and conditions to qualify can vary from state to state, and depending on your filing status, so take a look at your municipality’s tax laws to determine your options.
7. Medical Expense Deductions
Medical expenses can mount quickly for seniors and retirees. If your itemized medical expenses exceed 7.5% of your adjusted gross income, you can deduct them from your tax return. Eligible expenses include false teeth, glasses, hearing aids, prosthetic limbs, mobility devices, hospital bills, medical fees, medical nursing home care, health insurance premiums, prescriptions, and more.
8. Business Deductions
If you are running a business as a senior citizen, you should still be tracking and itemizing business expenses throughout the year to lessen your tax liability, provided these costs don’t exceed the IRS standard deduction. This includes advertising, office supplies, professional services, and the many other common federal tax write-offs for businesses.
9. Charitable Contributions
Charitable contributions aren’t just a great way to support causes in your community, they’re also one of the best federal tax deductions for seniors and other taxpayers. Provided you donate to a qualifying, tax-exempt organization, you can claim anywhere from 20% to 60% of your contribution as tax-deductible when filing your income taxes.
10. Sale of Primary Home
Many retirees choose to sell their homes and downsize. Although there is no longer a one-time over-55 capital gains tax exclusion of up to $125,000 for home sales, seniors (and all other individuals) can still receive an up to $250,000 capital gains tax exclusion for the sale of their primary home, provided they owned and lived in the home for at least two out of the last five years before selling it. Married couples filing jointly, meanwhile, don’t pay taxes on the first $500,000 in capital gains, regardless of their age.
Streamline Your Tax Preparation with FreshBooks
Though there are a number of unique tax strategies for seniors and retirees looking to reduce their income tax liability, taking full advantage of these exemptions, credits, and deductions can sometimes be complex. Accounting software like FreshBooks provides a simpler, faster way to track expenses and manage various tax credits throughout the year, saving you money on your yearly income tax bill.
Don’t miss out on invaluable deductions for seniors—try FreshBooks free today.
If you’re still working on growing your small business, tax write-offs are an equally vital topic to master. Learn more about small tax business deductions.
FAQs About Tax Deductions for Seniors
Do you have more questions about the best tax write-offs for senior citizens and retirees? Here are some of the most frequently asked questions and their answers.
What is the standard deduction for seniors over 65?
How much money can a 72-year-old make without paying taxes?
For 2024, any person over the age of 65 can earn up to $14,600 in annual gross income (or retirement income) without being required to file a return. This amounts to $1,850 more than the taxation threshold for younger taxpayers.
At what age do you no longer pay taxes?
As with taxpayers of any age, senior citizens are not required to pay any income tax if they earn less than the standardized income tax threshold. This threshold amount is slightly higher for seniors than for younger people, sitting at $15,700 in 2024.
What is the IRS loophole to protect retirement savings?
Many senior tax filers take advantage of variable life insurance as a way to invest their money and gain a sizable tax break. Variable life insurance benefits are unique—they essentially allow you to put after-tax money into an insurance policy that’s invested in the stock market or in bonds, allowing them to grow tax-free.
Is dental deductible from income tax?
Yes, dental expenses are tax-deductible. Provided your total itemized medical expenses exceed 7.5% of your adjusted gross income, your dental expenses can be deducted on your federal income return. This also goes for common dental expenses for seniors, such as the costs of dental surgery or false teeth.
More Useful Resources
Explore our diverse tax deduction guides catering to various niches. From small businesses to real estate agents, find valuable insights to optimize your tax savings.
About the author
Sandra Habiger is a Chartered Professional Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors. She supports small businesses in growing to their first six figures and beyond. Alongside her accounting practice, Sandra is a Money and Life Coach for women in business.
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