Seniors should be aware of these top strategies to potentially reduce their tax obligations.
Elevated Filing Thresholds for Individuals Aged 65 & Over
Individuals aged 65 and older benefit from higher thresholds for filing income tax returns compared to younger counterparts. If you reached 65 by the end of 2023, your gross income must exceed $15,700 to necessitate a federal tax return. For heads of households, the threshold is $22,650. For married couples filing jointly with one spouse over 65, the threshold is $29,200, while for both spouses over 65, it’s $30,700. Surviving spouses over 65 have a threshold of $29,200.
Additional Standard Deductions for Taxpayers Aged 65 & Older
Seniors aged 65 and older, or those legally blind, can increase their standard deduction for 2023. Single taxpayers over 65 can add $1,850 to the standard deduction of $13,850, or $3,700 if also blind. Married couples filing jointly or separately can add $1,500 per qualifying spouse to the $27,700 standard deduction, or $3,000 if both spouses are over 65 and one is blind.
“Long-term care insurance premiums are generally tax deductible, subject to specific conditions based on age, medical expenses, and policy details.”
Consideration of Itemized Medical Expenses
For seniors with substantial out-of-pocket medical expenses or long-term care insurance premiums, itemizing deductions instead of taking the standard deduction may be advantageous. This approach is beneficial when qualified medical expenses exceed 7.2% of adjusted gross income (AGI). Long-term care (LTC) insurance premiums are generally tax deductible, subject to specific conditions based on age, medical expenses, and policy details. For individuals aged 61 to 70, the IRS permits deductions of up to $4,520 for LTC premiums, increasing to $5,640 for those aged 71 and older.
Extended RMD Age and Tax Implications
Starting January 1, 2023, the SECURE Act 2.0 raised the required minimum distribution (RMD) age to 73 for individuals born after December 31, 1950, offering potential savings on taxable withdrawals from retirement accounts like the Thrift Savings Plan. Additionally, the Trump Tax Cuts (TCJA) are set to expire at the end of 2025, signaling the likelihood of higher federal income taxes from January 1, 2026 onwards.
For further insights, consult with an FRC® trained advisor in your locality.
