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Cutting back on expenses and making the most of your Social Security benefits aren't the only ways to avoid wasting money in retirement. It's just as crucial (or even more so) to create a solid tax strategy that protects your bottom line now that you're out of the workforce.
Below, we'll talk you through the most common mistakes retirees make when it comes to claiming deductions so you can keep more money in your pocket this tax season.
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Overlooking the higher deduction for those 65 and older
If you're at least 65 years old, you can likely take an extra $6,000 deduction (or $12,000 for married couples). You can claim this benefit whether you itemize your taxes or simply take the standard deduction.
This is a relatively new tax deduction, so don't overlook it when you're filing taxes this year. If your accountant doesn't point it out to you, make sure to bring it up. You might not qualify if your income is over a certain amount, but it's worth double-checking.
Forgetting to deduct home improvement costs from your home sales profit
When you sell a home, any profits over $500,000 for a married couple (or $250,000 for an individual) are subject to capital gains tax. However, you can deduct the money you spent making home repairs, remodels, and renovations from your total profit. This refers not just to renovations you made to get your home market-ready but also to any repairs and upgrades made during the entire time you lived in the house.
Missing state-specific deductions
Not every state offers senior-specific deductions, but if yours does, you don't want to overlook them. You should find a list of deductions on the website of the government body responsible for taxes in your state, such as the department of revenue, but your accountant can also point you in the right direction.
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Not accurately tracking medical expenses
You're allowed to deduct any medical expenses that surpass 7.5% of your adjusted gross income, but it's impossible to deduct these expenses if you haven't been carefully tracking them all year long.
If you miss out on the deduction this year, go out of your way to record all medical costs from this point onward so you can deduct them next tax season. Make sure to include your Medicare premiums, dental costs, vision costs, and out-of-pocket prescription costs.
Failing to deduct new car loan interest
Did you buy a new car during the 2025 tax year? If the car weighs under 14,000 pounds and was assembled in the United States, you can deduct up to $10,000 of the interest you paid on your car loan. (The total deduction will decrease if you make more than $100,000 as an individual or $200,000 as a married couple.)
Missing out on higher SALT deductions
You've always been able to deduct state and local taxes (SALT) if you itemize your taxes, but for several years, you could only deduct up to $10,000. However, between 2025 and 2029, you'll be able to deduct up to $40,000 instead.
Not deducting your long-term care insurance premium
Since Medicare doesn't cover long-term care, many seniors purchase additional care insurance to cover costs as they age. These policies can be expensive, but deducting the premium from your taxes can make them more affordable.
You're allowed to deduct more of your premium as you age, meaning individuals age 71 and older can deduct $6,020 of their insurance premium from their taxes.
Assuming you don't qualify for the Saver's Credit
Are you still contributing to a retirement fund? Tax filers under a certain income threshold may qualify for the Retirement Savings Contributions Credit (usually referred to as the Saver's Credit). This credit allows you to deduct up to $1,000 as an individual or $2,000 as a married couple based on how much you added to a retirement savings account in the last tax year.
Forgetting to deduct capital losses
Hopefully your investment portfolio is yielding solid returns, but if you've been forced to sell some investments at a loss, you may be able to deduct up to $3,000 worth of those losses from your overall income.
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Not staying on top of new tax deductions
Don't make the mistake of assuming your taxes will be the same this year as they were last year. New laws can take effect and drastically impact your bottom line if you don't stay on top of new rules regarding deductions, income limits, or senior-specific benefits.
Your accountant or tax professional should help familiarize you with any changes to the tax code when preparing your taxes this year, but if you have a question about anything, don't hesitate to ask.
Bottom line
Itemizing your taxes can be a useful way to crush your tax debt and extend your retirement savings as long as possible. However, itemizing is just one aspect of a sound tax strategy that will keep your finances in the black as you age.
Your accountant or retirement planner can help you create a tax-friendly strategy that includes planned savings accounts withdrawals and charitable deductions.
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