It is especially crucial for retirees over 65 to make the most of all applicable tax savings opportunities. That is particularly true if you are living on a fixed income. Some of you will need to earn a living from your retirement funds. It’s easier said than done to preserve one’s financial standing in retirement.
Thus, retirees, who frequently fail to take advantage of significant tax savings opportunities, should pay special attention to their tax conditions. It helps to be aware of the specific but often-overlooked tax benefits available to retirees over 65.
Extra Deduction for Elderly Over the Age of 65
The Internal Revenue Service (IRS) provides a tax incentive in the form of a higher standard deduction once you reach age 65. A single 64-year-old taxpayer, for instance, can take a $12,950 standard deduction in 2024 (rising to $13,850 in 2023). A 65-year-old taxpayer filing as a single person will receive a $14,700 standard deduction in 2024 and a $15,700 deduction in 2023.
You’re more likely to take the itemized deductions of $1,750 in 2024 instead of itemizing your deductions, which will increase to $1,850 in 2023.
And if you’re married and your partner is 65 or older, your combined standard deduction is increased compared to single filers. For 2024, the supplementary payment is $1,400 if just one couple is 65 or older and $2,800 if both partners are 65 or older.
Spousal IRA Contribution
The opportunity to contribute to an Individual Retirement Account (IRA) sometimes continues after you reach retirement age.
To put money into an IRA, you must work and earn money. But if you are married and your partner is still employed, they may contribute up to $6,000 to your regular or Roth IRA. This tax benefit is only available to you if your husband or wife has sufficient earned income to cover both your contribution and his or her deposits.
However, there is a significant restriction to bear in mind. If just one of you is 50 or older, your annual contribution to your IRA and your partner’s IRA can be at most $13,000. If you are over 50, your combined contribution can be, at most, $14,000.
Paying for Medicare and getting a tax break
Those who go into self-employment after retirement (as a consultant, for example) are eligible to deduct the premiums they pay for Original Medicare (Parts A, B, and D) and any Medicare supplemental insurance plans or Medicare Advantage premiums they pay.
Medicare premiums are deductible regardless of whether you itemize your taxes, and they are not subjected to the 7.5% of AGI threshold that applies to other medical expenses.
Yet there is a catch. You do not qualify for this deduction if you are eligible for coverage under a health insurance plan that is partially or fully paid for by your employer. Or, if your significant other is employed and provides health insurance for their household, their insurance.