Why Age 65 and Older Matters for Taxes

By Tax&Facts | Published on Feb 4, 2025 | Read: 3 Mins

When you turn 65, there are some important changes to your taxes that can help you pay less. Here's why this age is significant for tax filing:

1. Higher Standard Deduction

What is it? The standard deduction is the amount of money you can subtract from your total income before calculating how much tax you owe. If you’re under 65, you get one amount for the standard deduction, but when you turn 65 or older, you get a bigger deduction.

How does it help? This means that more of your income is not taxed, which can reduce the amount of tax you owe.

2. Special Tax Credit for Seniors

What is it? There is a tax credit available to people 65 and older (in some cases, also available to those with disabilities). A tax credit directly reduces the amount of tax you owe.

How does it help? If you qualify, this credit can lower your tax bill even more, giving you extra savings.

3. Social Security and Retirement Income

What is it? When you turn 65, you may start receiving Social Security benefits. These benefits might be taxable depending on how much other income you have. Similarly, if you’re receiving money from retirement accounts like 401(k)s or IRAs, you may have to pay taxes on that money.

How does it help? Even though you may have to pay taxes on some of this income, there are special rules that can help make sure you’re not paying more tax than necessary.

4. Medical Expense Deductions

What is it? People 65 and older often have more medical expenses. The good news is that you can deduct some of these expenses on your taxes if they are high enough.

How does it help? You can subtract these expenses from your income, which lowers your taxable income and can reduce the amount of tax you owe.

5. Required Minimum Distributions (RMDs)

What is it? If you have certain retirement accounts (like an IRA or 401(k)), the government requires you to start taking out a portion of your savings once you reach age 72. This is called a Required Minimum Distribution (RMD).

How does it help? While RMDs are taxable, knowing this rule can help you plan ahead so you're not surprised by how much of your retirement savings are taxed.

6. No Penalty for Early Retirement Withdrawals

What is it? If you're 59½ or older, you can take money out of your retirement accounts without facing a penalty.

How does it help? Normally, if you take money out of your retirement account too early, you could face a penalty, but once you turn 59½, you avoid that penalty. So, turning 65 means you can easily access your retirement funds if needed.

7. State-Specific Tax Benefits

What is it? Some states have special rules for seniors, like exempting Social Security benefits from state taxes or offering property tax breaks for homeowners 65 and older.

How does it help? These special benefits can help you save money on your state taxes.

In Short:

Once you turn 65, you can enjoy some tax breaks that help you pay less in taxes. This includes bigger deductions, tax credits, and special rules for things like Social Security benefits and medical expenses. These changes make it easier for seniors to manage their finances in retirement.