3. Reduce Tax Burdens With the Senior Standard Deduction
Filing taxes changes significantly as you age. The IRS offers a higher standard deduction for individuals who are 65 or older by the end of the tax year. This simple benefit directly reduces your taxable income, leaving more money in your bank account.
If you use commercial tax preparation software, ensure you check the specific box confirming your age. Many people rush through their filings and rely on the software’s defaults, inadvertently claiming the standard deduction for younger adults. If you are legally blind, the IRS provides an additional deduction amount, which you can stack on top of the age-based increase.
Beyond the federal level, investigate your state tax codes. Many states do not tax Social Security income, and several offer specific retirement income exclusions for pensions and 401(k) distributions. Taking advantage of these provisions minimizes the amount of your retirement savings going back to the government.
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