5 Big Tax Breaks for Older Americans

5 Big Tax Breaks for Older Americans

From Peter Reagan for Birch Gold Group

The last few years have featured heavy doses of economic turmoil for most older Americans trying to save for their retirement. That turmoil includes persistent (possibly long term?) inflation, pandemic panic, and even the potential for a near-term recession.

So let’s take a moment to cover a bit of good news.

Today, we present five meaningful tax breaks for older Americans. After all, you have better things to do with your money than let the government spend it!

Here’s the first…

Tax break #1: Bigger standard deduction

If you are 65 years of age or older, and you don’t itemize your tax deductions when you file your annual taxes, then you can make use of a higher standard deduction.

Here’s a summary:

The 2024 standard deduction for seniors is $1,950 higher than for people younger than 65 who file as individuals. Married couples can increase their standard deduction by $1,550 if one member of the couple is 65 or older and $3,100 if they’re both at least age 65.

You can also figure out your standard deduction by answering a few simple questions on the IRS website.

Some older Americans can also take advantage of a special tax credit…

Tax break #2: Credit for elderly or disabled Americans

The AARP nicely summarized this credit for those over 65 years of age:

The Credit for the Elderly and Disabled ranges from $3,750 to $7,500, depending on your income and filing status. If you owe $4,000 in taxes before the credit and you get a $3,750 credit, your tax bill will be just $250.

You can find out more about that credit on the IRS website. But for reference, here are the credit’s requirements in 2024:

You’re aged 65 or older OR retired on permanent and total disability and received taxable disability income for the tax year; AND with an adjusted gross income OR the total of nontaxable Social Security, pensions annuities or disability income under specific limits

Keep these requirements in mind, or seek the advice of a tax professional if you need help. On to the next tax break…

Tax Break #3: Forget about early withdrawal penalties after age 55 (or 59 ½)

If you lost your job during the COVID craziness (or any other reason), and you’re at least 55 years of age, taking an early distribution won’t cost you an extra 10%. It’s called the “rule of 55,” and it’s summarized on the Experian website:

The rule of 55 is an IRS policy that can allow you to begin taking penalty-free distributions from your 401(k), 403(a) or 403(b) if you lose or leave your job in the year you turn 55 or later. To use the rule of 55, you’ll need to leave or lose your job during the year you turn 55 or later, and you can only use the rule to withdraw from your most recent workplace’s plan.

It’s important to keep in mind that this rule only applies to your most recent workplace. Otherwise, after the age of 59 ½  you’re no longer subject to the IRS early distribution tax of 10%.

Let’s move on to the next bit of tax relief for older Americans…

#4: Some relief from property taxes

While this tax break doesn’t actually reduce your IRS tax bill directly, it saves you money on your annual property taxes. It’s based on an idea that essentially makes your home “less taxable,” but it’s important to note that each state is unique.

Here’s how to look into the relief available in your state:

A senior property tax exemption is a program that provides eligible senior citizens with a reduction in their property taxes to help alleviate the financial burden of homeownership in their later years. […] To apply for a senior property tax exemption, you’ll need to contact your local tax assessor’s office or visit their website. They will provide the necessary application forms and guide you through the process.

In the end, this process could save you hundreds to thousands of dollars a year, depending on state laws and your property value.

Of course, like most Americans (older or not), the incredible number of tax laws and their complexity can be overwhelming.

The good news is, if you’re older than 60, you can get help interpreting those laws…

#5: Free tax help if you’re 60+ years old

For the last five decades, the IRS has enlisted the help of volunteers and other professionals to provide free tax help for the elderly.

Here is the summary from their website:

In addition to VITA, the TCE program offers free tax help, particularly for those who are 60 years of age and older, specializing in questions about pensions and retirement-related issues unique to seniors.

While the IRS manages the VITA and TCE programs, the VITA/TCE sites are operated by IRS partners and staffed by volunteers who want to make a difference in their communities. The IRS-certified volunteers who provide tax counseling are often retired individuals associated with non-profit organizations that receive grants from the IRS.

More details about the VITA and TCE programs are available here (PDF). Using this free help could save you hundreds of dollars over paying a tax professional.

Once you add up your potential tax breaks and savings, then there is one more idea to consider that could help your retirement in the longer-term…

Turning tax breaks into stable, long-term savings

Hopefully, these tax breaks will help you reclaim some measure of financial independence. I’m confident you can find a better use for your money than the federal government!

And once you’ve reclaimed your money from the federal government, why not take the opportunity to diversify your savings outside of government control, as well? Secure your financial future with a tangible asset that’s uninflatable and thrives even during the most uncertain economic climates?

Consider leveraging some of the tax savings into an alternative asset like physical precious metals. Physical precious metals have acted as reliable stores of wealth for thousands of years. During times of instability, they have also been considered a safe haven.

That’s because metals like gold and silver have inherent and intrinsic value due to their utility. It’s also because they’re tangible and finite resources that don’t rely on any government or financial institution for their value. They can’t be printed or inflated away at the Fed’s whim, and they aren’t devalued by government debt.

You can get the rest of the story about the potential tax advantages of diversifying with precious metals like gold and silver on our education page.

2024, Featured, retirement savings, taxes