10 Things Almost Every Retiree Gets Wrong When Filing Taxes

Retirement changes almost everything about your finances, and your taxes are no exception. Unfortunately, many retirees learn that the hard way, overpaying year after year because of avoidable mistakes on their returns.

The good news? A little awareness goes a long way. Avoiding these errors could help you lower your financial stress and keep more of your money where it belongs. Here are the most common tax-filing mistakes retirees make and how to steer clear of them.

Itemizing instead of taking the standard deduction

When you file a tax return, you can choose between taking the standard deduction or itemizing deductions.

In some cases, itemizing deductions makes sense. But if the amount you itemize doesn't exceed the standard deduction, you could be missing out.

Federal tax reform in 2017 dramatically increased the size of the standard deduction. When filing your taxes next year, you should know that for the 2026 tax year, the standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly.

If your itemized deductions amount to less than the standard deduction, it's generally a good idea to stick with the latter.

Paying taxes on pensions unnecessarily

If you move to a new state, it's important to take a look at the tax rules for your new home.

For example, retirees moving from a state with an income tax to a state with no income tax could accidentally overpay state income taxes on their pension income.

Not reporting QCDs correctly

Retirees of a certain age can take advantage of QCDs, or qualified charitable distributions. A QCD is a tax-efficient way to make contributions to causes you care about.

You aren't eligible to make QCDs until you reach at least age 70.5. If you choose to use a QCD, you must report this transaction on your tax return.

As with other distributions from an IRA, you must report a QCD on line 4 of Form 1040. Although it's easy to overlook reporting a QCD, this oversight could increase your tax liabilities.

Forgetting to take medical deductions

If you have extensive medical bills during the year, don't forget to consider taking the medical deduction.

You are able to deduct medical and dental expenses that exceed 7.5% of your adjusted gross income. Depending on your medical bills, this could represent a significant savings.

Not realizing you might owe capital gains taxes on mutual funds

When you own a mutual fund, you don't always have control over when the underlying assets are sold. Mutual fund managers may make such sales during the course of the year.

You are responsible for paying taxes on the capital gains generated by your mutual fund.

Failing to report tax-free income

Although some income might be considered tax-free, you still have to report it on your tax return.

For example, municipal bond income might be tax-free. But you must report this income on your tax return, even though you won't necessarily have to pay taxes on the gain.

Selling stock with 'no basis'

When you sell a stock for more than you bought it for, the process generates a capital gain. You can calculate the capital gain by subtracting the purchase price from the sold price.

For example, if you bought a stock for $1 and sold it for $10, you would have a capital gain of $9.

You'll need to figure out the purchase price to avoid paying more in capital gains tax than necessary. If you sell a stock with a basis of $0, the entire sale price will be taxed as a capital gain.

Until 2011, custodians were not required to track the basis on stocks for their customers. So, this problem can be more common than many think.

Not keeping up with changes to tax law

Tax laws change from year to year. In some cases, a tax law change can significantly impact your tax return.

Making sure to prepare yourself financially and researching tax laws allows you to employ smart strategies that help you keep taxes as low as possible. Consider working with a tax professional who can guide you through such changes.

Forgetting about Social Security taxes

Many retirees are unaware that up to 85% of Social Security income can be subject to taxation. Generally, you'll pay more in taxes on your Social Security income as your combined income rises.

Combined income is your adjusted gross income plus nontaxable interest and half your Social Security benefits.

Here is how it works:

• Combined income between $25,000 to $34,000 for singles ($32,000 and $44,000 for couples) results in up to 50% of benefits being taxable.
• Combined income of more than $34,000 for singles (more than $44,000 for couples) results in up to 85% of benefits being taxable.

Being unaware of free tax-filing assistance

Navigating the tax system can get complicated. If you need help, you might not have to pay for assistance.

Instead, many seniors can tap into free tax filing assistance through the IRS's Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs.

Don't hesitate to take advantage of these free resources if you qualify for them. For the 2026 tax season, you are generally eligible for VITA if you make $69,000 or less. You typically must be 60 or older to use TCE.

Bottom line

Whether you are a worker bee or a retiree, your goal when it comes to taxes should be to keep more cash in your wallet.

Carefully filling out your tax forms and leaning on professional help when you need it can help you lower your tax bill. Avoiding the mistakes on this list will also help you hold on to more of your money.

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