5 of the Biggest Tax Breaks for Retirees

Each day, more than 11,000 Americans turn 65. They're not all planning immediate retirement, of course, but many are well on their way. Whether you're newly retired or planning for retirement, understanding how taxes can impact your finances is an important step. Fortunately, there are tax breaks that you should never miss out on -- the best tax software can help you claim these and more.

1. Extra standard deduction

Once you turn 65, the IRS provides an extra standard deduction. For the 2023 tax year, a single taxpayer can claim $15,700 instead of the $13,850 claimed by those under the age of 65. That's a standard deduction increase of $1,850. Paying less in taxes means keeping more money in your checking account each year.

2. Spousal IRA

Normally, you must have earned income to contribute to an IRA. However, if your spouse is still working, you can contribute to a spousal IRA that is individually owned. That means that any money you contribute belongs to you, even if it's your spouse earning the lion's share. The IRS contribution limit for a spousal IRA in 2023 is $6,500. That limit will be raised to $7,000 for the 2024 tax year.

If you're both over the age of 50, your total household contribution to an IRA cannot exceed $15,000 ($16,000 for 2024), but it's nice to be able to contribute to your own account.

3. Solo 401(k)

There is no age limit on who can contribute to a Solo 401(k), so if you or your spouse own a small business with no employees, you can continue to contribute. While you'll have to pay taxes on the funds when they're withdrawn, contributions are made pre-tax, meaning you won't have tax due this year on the income contributed to the retirement account.

Depending upon how much they earned in 2023, small business owners over the age of 50 can contribute up to $73,500 in pre-tax dollars.

4. RMD workaround

If you're fortunate enough not to need the required minimum distribution (RMD) from a traditional IRA, consider transferring the cash directly to a charity. Thanks to the qualified charitable distribution (QCD), you can transfer up to $100,000 annually to an eligible charity and avoid paying taxes on it.

5. Medical, dental, eyecare, and hearing aid deductions

If your total medical expenses exceed 7.5% of your adjusted gross income (AGI) and you itemize your personal deductions, many of your medical and dental expenses are deductible. These include:

• Medicare premiums
• Fees paid to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and nontraditional medical practitioners
• Hospitalization
• Prescription drugs
• Inpatient treatment for alcohol or drug addiction
• Amounts paid for false teeth, reading or prescription eyeglasses, contact lenses, hearing aids, a guide dog or other service animal to help visually impaired or hearing disabled person, or a person with other physical disabilities, crutches, or wheelchairs
• Weight-loss programs for specific medical issues, including obesity
• Long-term care insurance premiums
• Nursing home care
• Transportation for essential medical care

This is not a comprehensive list, but gives you an idea of how many different services can be deducted. Say your AGI is $50,000 and your total medical expenses amount to $4,000. That means you're above the 7.5% threshold and are eligible for the deduction ($4,000 ÷ $50,000 = 8%).

It may be tough to convince a 21-year-old of this, but aging does have its perks. While paying taxes is not necessarily one of those perks, taking advantage of tax breaks certainly is.