What is the extra standard deduction for seniors over 65

Q: What is the tax deduction for seniors over 65?

Increased Standard Deduction When youre over 65, the standard deduction increases. The specific amount depends on your filing status and changes each year. For the 2021 tax year, seniors get a tax deduction of $14,250 (this increases in 2022 to $14,700).

Getting older has its perks, including tax breaks. Your income threshold for filing a tax return is higher, you get a bigger standard deduction, and you can defer or avoid taxes on more income. Below are the detail of some tax breaks you’ll qualify for when you turn 65.

Table of Contents Show

Key Takeaways
A Larger Standard Deduction
Standard Deduction or Itemized Deductions—Which Is Better?
A Higher Tax Filing Threshold
Taxable Social Security Income
Tax Credits for Older Adults
Frequently Asked Questions (FAQs)
Which states provide the best tax breaks for retirees?
How do you earn tax breaks in your retirement years?
Do you have to pay income tax after age 70?
Do you get an extra deduction for being over 65?
What is the tax deduction for seniors over 65?

Increased Standard Deduction: You qualify for a larger standard deduction if you or your spouse is age 65 or older. The standard deduction for single seniors in 2021 is $1,700 higher than the deduction for taxpayer younger than 65 who file as single or head of household. If you are Married Filing Jointly and you or your spouse is 65 or older, your standard deduction increases by $1,350 each. If both you and your spouse are 65 or older, your standard deduction increases by $2,700.
Different Filing Threshold: A single tax payer can have gross income of up to $14,250 before required to file a tax return in 2021. The tax-filing threshold is $27,800 for couples when both are age 65 and older. Note, there may be reasons to file anyway as refunds, earned income credit, stimulus payment.
State Senior Tax Exemptions: In some states and local jurisdictions, you may qualify for property or tax deferrals or exemptions if you earn below a certain income level. In Texas, for example, homeowners are eligible for a $10,000 homestead exemption on school taxes in addition to the $25,000 exemption for all homeowners. Check the specific rules in your area to claim a property tax exemption.
Tax Credit for Elderly/Disabled: You may be eligible for a tax credit meant to reduce seniors’ tax bills. Singles can claim the credit if their adjusted gross income is below $17,500 and they have nontaxable Social Security and pension income below $5,000. The value of the credit ranges from $3,750 to $7,500. Check (sch R) for 2021 limits.
A worker ages 50 and older can contribute an additional $1,000 in to an IRA if s/he has earnings. This means that if you’re in the 24% tax bracket, maxing out on your IRA would save you $1,680 on your federal tax bill. That’s $240 more than the maximum possible tax break of $1,440 for a younger retirement saver in the same tax bracket. You also may qualify for a saver’s credit if you’re a moderate- or low-income senior who contributes to a retirement account.
Retirement Plan Contribution Benefits: The taxpayers over age 65 and has earned income with a 401(k) plan may be eligible to make additional catch-up contributions. For example, you can defer paying income tax on $6,500 more than younger workers if you contribute that amount to the plan. Income tax won’t be due on this money until it’s withdrawn from the account.
Charitable Deductions QCD: If you are 70 1/2 or older and withdraw money from a traditional IRA, make a qualified charitable distribution (QCD), you can transfer up to $100,000 per person per year and not owe income tax on that withdrawal — and it counts toward your required minimum distribution. There’s also a “below the line” deduction of up to $300 for cash donations to charity for single filers, and $600 for married filing jointly.
Tax Exemption for Social Security: If Taxpayer ’s provisional income for single or head of household (gross income, tax-free interest and half of the recipient’s Social Security benefit -amount) is less than $25,000 ($32,000 for Married Filing Jointly), Social Security benefit is tax-free. If it is between $25,000 and $34,000 ($32,000 and $44,000 for Married Filing Jointly), then up to 50% of Social Security benefit are taxable. If it is more than $34,000 ($44,000 for joint filers), then up to 85% of Social Security benefit are taxable.

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Retirement has a lot to offer, which explains why so many taxpayers diligently save for it over the course of their lifetimes. There are those perks that money really can’t buy, like your grandchildren, and the things you’ve been saving for: travel, not going to work every day, or even just sleeping in late on a Monday morning.

Key Takeaways

If you're 65 or older, you get a larger standard deduction, which might make it hard to choose between an itemized deduction and a standard deduction.
You also have a higher filing threshold and receive a tax credit.
Your Social Security benefits may be considered taxable income, however. It depends on your overall earnings.

The Internal Revenue Service (IRS) gets it. The U.S. tax code offers quite a few tax breaks exclusively to older adults, including a special tax credit just for those 65 or older.

A Larger Standard Deduction

You won't have to pay taxes on as much of your income, because the IRS allows you to begin taking an additional standard deduction when you turn age 65.

For tax year 2022—the tax return you file in 2023—you can add an extra $1,750 to the standard deduction you’re otherwise eligible for, as long you are unmarried and not a surviving spouse. You can add $1,400 for each spouse who is age 65 or older if you’re married and file a joint return. In tax year 2023, those numbers increase to $1,850 and $1,500 respectively.

Note

To qualify for this deduction, you must turn 65 by January 1 of the following tax year.

Standard Deduction or Itemized Deductions—Which Is Better?

You have a choice between claiming the standard deduction instead of itemizing your deductions, but you can't do both. And the Tax Cuts and Jobs Act (TCJA) pretty much doubled the basic standard deductions for all filing statuses—the deduction you can claim before you claim the extra bonus deduction for being age 65 or older, making it a somewhat difficult decision.

As of tax year 2022, the base standard deductions before the bonus add-on for seniors are:

$25,900 for married taxpayers who file jointly, and qualifying widow(er)s
$19,400 for heads of household
$12,950 for single taxpayers and married taxpayers who file separately

Many older taxpayers may find that their standard deduction plus the extra standard deduction for age works out to be more than any itemized expenses they can claim, particularly if their mortgages have been paid off and they don't have that itemized interest deduction any longer. But you could gain a larger deduction for itemizing if you still have a mortgage and factor in things like property taxes, medical bills, charitable donations, and any other deductible expenses you might have.

A Higher Tax Filing Threshold

Your threshold for even having to file a tax return in the first place is also higher if you’re age 65 or older, because the filing threshold generally equals the standard deduction you’re entitled to claim.

Most single taxpayers must file tax returns when their earnings reach $12,950 (the amount of the standard deduction), but your deduction can go up to $14,700 if you’re age 65 or older (the standard deduction plus the additional $1,750). You can jointly earn up to $27,300 if you or your spouse is 65 or older, and you file a joint return. If you’re both 65 or older, your deduction could be $27,800.

Your Social Security benefits might or might not be taxable income. It depends on your overall earnings.

Add up your income from all sources, including taxable retirement funds other than Social Security and what would normally be tax-exempt interest. Then add half of what you collected in Social Security benefits during the course of the tax year. The Social Security Administration (SSA) should send you Form SSA-1099 around the first day of the new year, showing you exactly how much you received.

You don’t have to include any of your Social Security as taxable income if the total of all your other income and half your Social Security is less than $25,000 and you’re single, a head of household, or a qualifying widow or widower. That increases to $32,000 if you’re married and filing a joint return, and it drops to $0 if you file a separate return after living with your spouse at any point during the tax year.

If you fall outside of these income levels, up to 85% of what you collect in Social Security might be taxable.

Note

The IRS offers an interactive tool to help you determine whether any of your Social Security is taxable and, if so, how much.

Tax Credits for Older Adults

One of the most significant tax breaks available to older adults is the tax credit for the elderly and disabled. This tax credit can wipe out some, if not all, of your tax liability if you end up owing the IRS.

You must be age 65 or older as of the last day of the tax year to qualify. That January 1 rule applies here, too—you’re considered to be age 65 at the end of the tax year if you were born on the first day of the ensuing year. You must be a U.S. citizen or a resident alien, but if you’re a non-resident alien, you might qualify if you’re married to a U.S. citizen or a resident alien.

In general, you must file a joint married return with your spouse to claim the credit if you’re married unless you didn’t live with your spouse at all during the tax year. And you won’t be eligible for this credit if you earn more than the following:

$17,500 or more and your filing status is single, head of household, or a qualifying widow or widower
$20,000 or more and you’re married, but only one of you otherwise qualifies for the credit
$25,000 or more, and you file a joint married return
$12,500 or more, and you file a separate married return, but you lived apart from your spouse all year

Note

These numbers are based on your adjusted gross income (AGI), not your total income. Your AGI is arrived at after taking certain deductions, also known as "adjustments to income," on Schedule 1.

Limits also apply to the nontaxable portions of your Social Security benefits, as well as to nontaxable portions of any pensions, annuities, or disability income you might have. Those limits are as follows:

$5,000 or more, and your filing status is single, head of household, or qualifying widow or widower
$5,000 or more, and you’re married, but only one of you otherwise qualifies for the credit
$7,500 or more, and you file a joint married return
$3,750 or more and you file a separate married return, but you lived apart from your spouse all year

Frequently Asked Questions (FAQs)

Which states provide the best tax breaks for retirees?

Many states exempt Social Security income from taxation, and some states don't tax income at all. The best states to retire for tax reasons are currently Alabama, Hawaii, Illinois, Mississippi, and Pennsylvania.

How do you earn tax breaks in your retirement years?

Once you turn 65, you automatically have a larger standard deduction available, so be sure you're taking advantage of that if you're not itemizing deductions. When you reach age 70 and a half, you can also reduce your tax liability by giving some of your IRA distributions directly to a charity. This counts toward your required minimum distributions. Talk to your financial advisor about other ways to lower your taxes in retirement.

Do you have to pay income tax after age 70?

A portion of your income from Social Security, pensions, disability, and annuities is nontaxable, but if you make more than the limits, you will still have to pay some taxes after age 70.

Do you get an extra deduction for being over 65?

Standard Deduction for Seniors – If you do not itemize your deductions, you can get a higher standard deduction amount if you and/or your spouse are 65 years old or older. You can get an even higher standard deduction amount if either you or your spouse is blind. (See Form 1040 and Form 1040-SR instructionsPDF.)

What is the tax deduction for seniors over 65?

Increased Standard Deduction When you're over 65, the standard deduction increases. The specific amount depends on your filing status and changes each year. For the 2021 tax year, seniors get a tax deduction of $14,250 (this increases in 2022 to $14,700).