Retirees can save thousands if they understand these tax breaks

Social Security is an essential lifeline for millions of US retirees, making it essential that they take advantage of every tax benefit available. The Internal Revenue Service (IRS) offers several tax deductions for seniors, but not everyone knows about them.

Understanding these deductions can help seniors maximize their income and make sound financial decisions. It can also allow them to pocket some extra cash. In this article, we will discuss 10 tax breaks for retirees that you may not know about.

1. Higher standard deduction

Seniors who are 65 or older or whose spouse is at least 65 can claim a higher standard deduction. For 2024, the standard deduction is $1,550 more than the deduction available to those younger than 65. Married couples can increase their standard deduction by $1,950 if one of them is over 65 and $3,900 if both are 65 or older. Additionally, a blind taxpayer or spouse may receive an even higher standard deduction.

2. Spouse’s IRA Contribution

Retirement doesn’t mean you can’t contribute to an Individual Retirement Account (IRA). You generally need earned income to contribute to an IRA, but if your spouse is still working, he can contribute up to $7,000 to a traditional or Roth IRA, or up to $8,000 if you’re 50 or older. This means that the combined total contributions to your IRA and your spouse’s IRA cannot exceed $14,000 annually, or $16,000 if you are both age 50 or older.

3. Different submission threshold

The filing threshold refers to the income level at which you must file a tax return. Different deposit thresholds apply for different deposits. For 2024, seniors don’t have to file a return unless their income exceeds $14,600 for singles or $29,200 for married over-65s. The threshold is even higher for those who only receive Social Security as their primary source of income, and you may not need to file a return at all.

4. Property tax reductions

Although property tax rules vary by state, many retirees qualify for property or school tax deferrals or exemptions if they meet certain criteria. For example, Texas homeowners age 65 or older qualify for an additional $10,000 exemption on school district taxes. It is important for retirees to understand the property tax rules in their region, as they may need to complete a separate tax form or file separately to claim a property tax exemption.

5. Social security tax exemption

If your Social Security and other income totals less than $25,000 annually, you don’t have to pay federal income taxes. For 2024, if your income is between $25,000 and $34,000, you only pay taxes on half of your benefits. Married couples filing jointly pay no Social Security taxes if their income is under $32,000 and pay taxes on 50 percent of their benefits if their annual income is between $32,000 and $44,000.

6. Tax deductibility of Medicare premiums

If you become self-employed after retirement, you can deduct premiums paid for Medicare Part B and Part D. You can also deduct the cost of Medicare supplement policies or a Medicare Advantage plan. This deduction is available to retirees whether they itemize or not. Additionally, this deduction is not subject to the 7.5% adjusted gross income test that applies to itemized medical expenses. However, retirees cannot claim this deduction if they are covered by an employer-subsidized health plan provided by their or their spouse’s employer.

7. Credit for seniors and people with disabilities

You may be eligible to claim a tax credit if you or your spouse are 65 or older and have a low income. For 2024, your adjusted gross income must be less than $17,500 ($25,000 if both you and your spouse are 65 or older), while your nontaxable Social Security and pension income must be be under $5,000 ($7,500 for couples) to claim the credit. If only one spouse is eligible, the threshold income level is $20,000. Those with permanent disabilities may also qualify for the discount, regardless of age.

8. Business and Hobby Deduction

If you start a business after the age of 65, such as consulting or selling on online platforms, craft shows or local shops, you may be eligible for additional deductions. These deductions depend on the costs associated with running the business, such as advertising, home office expenses, supplies, and more.

9. Give money to charity

Once you turn 70½, you can make charitable donations without paying income taxes using qualified charitable distributions (QCDs). Under QCDs, retirees who meet the age criteria can contribute up to $100,000 annually from their traditional IRAs. Your spouse can do the same from the IRA. This transfer is excluded from taxable income and counts toward the required minimum distribution (RMD).

10. Additional IRA Deduction

This tax break isn’t just for retirees, but it’s still worth mentioning. For 2024, workers age 50 and older can save more by contributing to an IRA. For example, a 50-year-old man in the 24% tax bracket can save $1,920 in tax, compared to $1,680 in savings for a younger person in the same tax bracket.

This article originally appeared on ValueWalk

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