Retirement tax planning and other tax tips for seniors

Keys takeaways

• You’re required to file a tax return, regardless of your age, as long as you meet the IRS’s gross income filing requirements.
• Social Security income could be taxable, when your income is above what is considered the base amount.
• The IRS offers an additional standard deduction amount for taxpayers who are 65 and older.
•  If you or your spouse are unable to care for yourself and need outside care while the other spouse is working, you may qualify for a tax credit.
• If you have a dependent child or children under 17, you may be able to claim the $2,000 Child Tax Credit for each child.
• If you have a dependent who is not eligible for the Child Tax Credit, such as a child 17 or older, you may be eligible for the credit for other dependents.
• The IRS allows you to deduct qualified unreimbursed medical and dental care expenses that exceed 7.5% of your adjusted gross income (AGI).
• If you are 70½ or older, you may transfer up to $100,000 directly from your IRA to a qualified charitable organization, tax free.
• You can request distributions from your traditional IRA at any time, which will be included in your taxable income for the year, but you’ll pay an additional 10% tax if you aren’t at least 59½.
• You can start making withdrawals from a Roth IRA without having to worry about taxes or penalties if you meet the 5-year rule and are at least 59 ½ years old.
• If you have a traditional IRA or a workplace retirement plan, and you are at least 73, you must withdraw certain amounts each year, called required minimum distributions (RMDs).

When can I stop filing tax returns? 

Regardless of your age, you’ll be required to keep filing a tax return and paying tax as long as you meet the gross income requirements. However, if you are over the age of 65, the gross income limits are a bit higher.

If you and your spouse are younger than 65 years old, the IRS requires you to file a return if your gross income exceeds the following amounts, based on your filing status.

Single: $14,600

Head of Household: $21,900

Married Filing Jointly: $29,200

Married Filing Jointly: $30,750

Qualifying Surviving Spouse: $29,200

Married Filing Separately: $5

If you or your spouse are 65 or older, the IRS requires you to file a return if your gross income exceeds the following amounts, based on your filing status. 

• Single: $16,550
• Head of Household: $23,850
• Married Filing Jointly: $30,750 – if one spouse is 65 or older 
• Married Filing Jointly: $32,300 – if both spouses are 65 or older 
• Qualifying Surviving Spouse: $30,750
• Married Filing Separately: $5

If you have $400 or more in self-employment income, you must file a tax return.

Do I need to include my Social Security on my taxes?

Social Security income could be taxable, when your income is above what is considered the base amount. Social Security doesn’t become taxable until your total income plus half of your benefits exceeds the base amount of $25,000, or $32,000 if you are filing a joint return. If you’re married and filing separate returns, you may have to include 85% of your benefits as part of your taxable income if you lived with your spouse at all during the year. However, no more than 85% of the total benefits you and your spouse receive are ever taxable. 

There is an annual Social Security cost-of-living increase that starts each January. Because Social Security is considered partially taxable income, the increase means you could pay higher taxes. Now is a good time to start planning for next year with your Tax Pro, so you will be prepared. 

What is the current standard deduction for taxpayers 65 and older?

For tax year 2024, if you are 65 or older, you may increase your standard deduction by $1,950 if you file Single or Head of Household. If you are Married Filing Separately, Qualified Surviving Spouse, or Married Filing Jointly and you OR your spouse is 65 or older, you may increase your standard deduction by $1,550. If both you and your spouse are 65 or older, you may increase your standard deduction by $3,100. 

• Single: $16,550.
• Head of Household: $23,850.
• Married Filing Jointly: $30,750 if one spouse is age 65 or older, $32,300 if both spouses are age 65 or older.
• Married Filing Separately: $16,150.

What tax credits do seniors receive?

Credit for dependent care:

 If you or your spouse are unable to care for yourself and need outside care while the other spouse is working, you may qualify for this credit. The credit is based on a percentage of your qualified expenses, up to $3,000 for one person and $6,000 for more than one person. The maximum credit for the care of one qualified person is $1,050. The maximum credit for two or more qualifying people is $2,100. All taxpayers are eligible for this credit, regardless of their income. 

Child tax credits:

If you have a dependent child or children under age 17, you may be able to claim the $2,000 Child Tax Credit for each child. You may also be eligible to claim the Additional Child Tax Credit — this is a refundable credit that uses up to $1,700 per child of the unused credit. This may be used as part of your refund if you don’t use it to reduce your taxes to zero.

Important! The child must be a qualifying child by meeting the following tests:

• Relationship Test – Your qualifying child must be your:
• Child (son, daughter, stepchild, adopted child, or eligible foster child) or descendant (for example, grandchild or great grandchild).
• Sibling, half sibling, stepsibling, or descendant (for example, nephew or niece).
• Age Test – Your qualifying child must be under 17.
• Residency Test – Your qualifying child must have the same main home as you for more than half the year.
• Support Test – The qualifying child must not provide more than half their own support.

Credit for other dependents:

If you have a dependent who is not eligible for the Child Tax Credit such as a child 17 or older or a child without a Social Security number, you may be eligible for the credit for other dependents. This credit is for taxpayers with dependents who do not qualify for the child tax credits. The credit is a $500 per dependent, which is nonrefundable, meaning you can only take the amount you need to reduce your taxes to zero.

Seniors are eligible for any of the child tax credits if they have qualifying dependents and earned income.

What tax deductions do seniors receive?

You should know that your medical and dental expenses might be tax deductible. The IRS allows you to deduct qualified unreimbursed medical and dental care expenses that exceed 7.5% of your AGI. These deductions might include unreimbursed purchases for treatments, surgeries, preventative care, and visits to the doctor.

What retirement plan contribution benefits are there?

While not a tax credit, if you are 70 ½ and older, you may transfer directly from your IRA to a qualified charitable organization up to $100,000, tax free. It can satisfy the required minimum distribution. 

Unfortunately, there is no deduction allowed for the loss in value in a 401(k) or IRA. 

Traditional IRA distributions and taxation 

You can request distributions from your traditional IRA at any time, which will be included in your taxable income for the year. However, if you request a distribution before you are at least 59 ½ years old, you’ll be required to pay an additional 10% tax on what you withdraw, unless you qualify for a hardship exception. You must start withdrawing from your traditional IRA when you reach age 73.

Withdrawals from a Roth IRA during retirement 

You can start making withdrawals from a Roth IRA without having to worry about taxes or penalties as long as you withdraw at least 5 years from the start of contributions and are at least 59½ years old, but you’ll pay a 10% tax if you aren’t 59½ yet. There is no requirement to withdraw from your Roth IRA or Roth 401(k) plan at any age. 

Required minimum distributions

If you have a traditional IRA or a workplace retirement plan, and you are at least 73, you must withdraw certain amounts each year, called required minimum distributions (RMDs). The amount you’re required to withdraw is based on your retirement account balance.

Required minimum distributions are due:

April 1, 2025, based on your account balance on December 31, 2023.

Dec. 31, 2025, based on your account balance on December 31, 2024.

Make sure you get all the credit for working hard your whole life. Have questions? You can reach out to a Jackson Hewitt Tax Pro any time of year.