[Last updated December 16, 2024]

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Doing your taxes can be complicated, but understanding the tax deductions and credits available to seniors can be financially beneficial. From deductions for charitable donations to credits for older adults, here is everything you need to know about tax deductions and credits for seniors for the 2024 tax year.  

What are tax deductions and credits? 

Before diving into the details, it’s important to understand the basics of tax deductions and credits — two essential tools for reducing your tax burden.

A tax deduction lowers your taxable income, which in turn reduces the amount of taxes you owe. Think of it as a way to “write off” certain expenses or contributions, such as student loan interest, charitable donations, or medical expenses, making less of your income subject to taxation.

On the other hand, a tax credit offers a more straightforward benefit: It directly reduces your tax bill dollar for dollar. For example, if you owe $1,000 in taxes and qualify for a $500 credit, your tax bill drops to $500. Some credits, like the earned-income tax credit (EITC), can even result in a refund if they exceed your total tax liability.

While deductions and credits serve different purposes, both can significantly impact your overall tax liability, making it essential to know which ones you qualify for and how to claim them effectively.

Important senior tax deductions and credits 

Knowing which deductions and credits apply to you as a senior is crucial to making the most of your money in retirement. Let’s break down the important tax deductions and credits for seniors.

Increased standard deduction and additional deduction for seniors

The standard deduction for the 2024 tax year has increased due to inflation. The new standard deduction for married couples who intend to file together is $29,200. The standard deduction for married couples filing separately or for single taxpayers is $14,600. Adults 65 and older are eligible to take an additional deduction of $1,550 (married) or $1,950 (single) on top of the new standard deduction for 2024. Note that the IRS considers you 65 the day before your 65th birthday.

However, if the senior is claimed as a dependent, the standard deduction is limited to either $1,300 or $450 plus their earned income, whichever is greater.

Business and hobby deductions 

When seniors retire from full-time jobs, many enjoy relaxing and living the good life. Others choose to embark on newfound adventures and hobbies. Many seniors work as consultants, freelancers, or contractors, and some even start their own businesses. 

The line between business and hobby can be muddy. According to the IRS, the difference between the two lies in the fact that one is for fun and one makes you money. If you receive more than $5,000 for your goods or services — even if you use online marketplaces or payment apps — you may receive a Form 1099-K. All profits that you make are taxable. Although you are paying on your profit, you may be eligible for deductions and other write-offs related to your business, including but not limited to: 

  • Home office deduction. 
  • Heating and cooling expenses.
  • Phone and internet expenses. 
  • Professional cleaning fees. 
  • Home office equipment. 
  • Stationery. 
  • Depreciation of office furniture and technology. 

Medical expense deductions 

As you age, your medical expenses will likely increase. You can expect to pay more for your health and wellness, whether because of increased doctor visits or attending to more health issues. When you itemize the costs of your medical expenses, you can deduct them from your income taxes. You can deduct medical expenses only if they exceed 7.5% of your adjusted gross income (AGI). 

You may be eligible for tax deductions for the following: 

  • Mental health services. 
  • Prescription costs. 
  • Optometrist visits and glasses. 
  • Home health care and aide services. 
  • Health insurance premiums. 
  • Dentures or additional dental services. 
  • Medical travel expenses, such as parking fees and transportation costs. 

Charitable contributions 

If you give to charity, you might be eligible for a tax deduction. When you donate money or items to a qualified charitable organization, you may be allowed to deduct the amount donated or the property’s fair market value. If you donate a car or boat valued at over $500, note that your deduction is capped to the gross proceeds from the sale of your donation. 

Charitable deductions apply only when you itemize. The best way to get the highest deduction is to make all your yearly contributions within the same year as opposed to once every year (for example, donating on January 1 and December 31 of the same year, essentially doubling your yearly contributions).

Social Security 

Depending on the situation, some older adults may have the luxury of not filing taxes at all. Once they turn 65, they have a different filing threshold. You do not need to file taxes if you are over 65 and earn less than $16,550 as a single filer. If you are married and filing jointly and one spouse is 65 or older, the filing threshold increases to $30,750, and if both spouses are 65 or older, it rises to $32,300.

If your primary income comes from a pension or Social Security, you may not be required to file taxes, as Social Security benefits are often exempt from federal income taxes. You may not have to file taxes if half your Social Security payments and other earnings are less than $25,000 annually. Individual filers with a total gross income, including half their Social Security, of over $25,000 and married couples filing jointly earning over $32,000 may be taxed on up to 50% of their Social Security income. Individuals earning over $34,000 or couples earning over $44,000 may be taxed on up to 85% of their Social Security benefits. 

Credit for the elderly or disabled 

There is a tax credit for people over 65 and those under 65 with a permanent disability. The amount depends on filing status and income. You must meet multiple requirements to use this tax credit — and these specifications can change each year. To ensure you qualify for this tax credit, try using the IRS interactive tool or speak with an accountant.

Estate and gift tax 

You can make an annual gift of up to $18,000  to any one person without incurring a gift tax. This amount may change in the coming years. Spouses can also “split” gifts, doubling the amount a married couple can gift annually. Regarding estates, you can leave up to $13.61 million to family or friends free of any federal estate tax. 

Retirement plan contributions 

The maximum retirement plan contribution will increase, allowing individuals to contribute up to $23,000 to their 401(k), 403(b), and the majority of 457 plans and up to $7,000 to IRAs.  

When you contribute to a retirement account, you often can receive a saver’s credit, which lets you deduct a portion of your retirement contribution from the amount you owe the IRS in taxes. A nonrefundable saver’s credit helps to reduce the tax liability you owe, but you won’t receive a refund from the IRS for anything left over. The maximum AGI to be eligible for the saver’s credit — or retirement savings contribution credit — has increased to: 

  • $76,500 for jointly filing married couples. 
  • $57,375 for heads of household. 
  • $38,250 for individuals or separately filing married couples. 

Tax deductions and credits for seniors: The bottom line 

Knowing your tax deductions and credits can greatly benefit you as a senior. If you are in retirement, you may receive even more benefits, tax deductions, tax exemptions, and tax credits. The rules change each year, and staying on top of them is vital to get the most rewards.