Four Underrated Tax Benefits All US Retirees Over 65 Should Avail Of

Many US retirees above 65 are on a fixed income and are dealing with stress, figuring out how to stretch their retirement savings for the remainder of their lives.

Some retirees claim Social Security too early and get locked into reduced monthly checks. The top reasons for early claims are financial and health-related concerns. At the same time, many fail to save adequately in their 401(k)s or cashed out prematurely during their working years.

The increasingly complex financial situation for retirees, including rising living and long-term care costs, compels many to unretire to supplement their current incomes.

Moreover, different forms of taxes in retirement also make it difficult to hold on to your life savings in your golden years. Hence, it is imperative that retirees above 65 fully utilise every tax break available to them.

Deduct Medicare Premiums And Associated Costs

Self-employed retirees can deduct Medicare Part B and Part D premiums from their annual taxable income to reduce their tax liabilities. They can also deduct costs associated with Medicare Advantage plans or Medigap policies.

If you are working as a consultant, you can deduct these expenses regardless of whether they are itemised.

Note that these tax deductions cannot be claimed if you qualify to be eligible for an employer-subsidised health plan.

The same applies if you are eligible to be covered by family medical coverage under your spouse's employer.

Use The Additional Standard Deduction For People Over 65

The Internal Revenue Service offers a special standard deduction for retirees over 65. In 2024, a single 65-year-old taxpayer is eligible for £13,198 ($16,550) in standard deductions, for which they will file returns in early 2025.

Meanwhile, a 64-year-old retiree can claim a regular standard deduction of £11,643 ($14,600) on their 2024 tax return. Hence, those above 65 can reduce their annual taxable income by an extra £1,555 ($1,950) on top of the regular standard deduction.

Meanwhile, married couples with at least one spouse above 65 are entitled to bigger standard deductions than couples under 65. If one of you is 65 or older, the extra benefit on top of regular deductions is £1,236 ($1,550) for 2024. If both are 65, the additional amount goes up to £2,472 ($3,100).

Lower Taxes With IRA Contributions From Your Partner

Individual retirement accounts (IRAs) offer more customised investment options than 401(k)s, but they have a lower annual contribution limit of £5,582 ($7,000) for 2024, which remained unchanged in 2025.

Retiring doesn't mean you avoid any chance of continuing to grow your money in an IRA. However, you are required to have earned income to contribute to an IRA.

If you are married and your spouse is still working, the person can contribute to a traditional or Roth IRA you own up to the annual limit. This way, you grow your IRA balance and deduct IRA contributions from your annual taxable income.

Tax Credits For The Elder With Lower Income Levels

If you are a 65-year-old or older retiree or a retiree under 65 who left the workforce on permanent and total disability and receives taxable disability income, you become a "qualified individual" to receive tax credits.

However, qualified individuals filing tax returns with a single filing status must have an adjusted gross income under £13,955 ($17,500). The AGI is under £15,949 ($20,000) if you are married and file a joint return, given that only one partner qualifies for the credit. If both spouses qualify and file tax returns jointly, the AGI must be under £19,937 ($25,000).

There is also a second income test, which states that single filers' combined total non-taxable annuity, pension, Social Security, and disability income should be under £3,987 ($5,000).

The same limit applies for joint filers with one spouse qualifying for the credit. However, it increases to £5,981 ($7,500) for joint filers, with both partners qualifying for the credit.