9 Tax Breaks That Get Better With Age

NEWS & TRENDING - TAX NEWS
Plenty of financial perks come with getting older, starting with these tax breaks.
Updated May 8, 2024
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Whether you’ve already retired or remaining part of the workforce for a few years, taxes are part of your financial future. And while you're probably not looking forward to tax season, that could change as you get older.

Americans age 50 and up receive crucial age-based tax breaks that can make life a little easier after retirement. 

Keep reading to learn about nine useful tax benefits of aging that could help boost your bank account.  

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Catch-up contributions for IRAs

karagrubis/Adobe IRA labelled golden egg on cash

Contributions made to traditional IRAs are tax deductible, so they lower your overall taxable income for the year. The IRS regulates how much you can contribute to a traditional IRA over a single tax year. 

For instance, for the 2024 tax year, individuals may contribute a maximum of $7,000 across all of their IRAs, including both traditional and Roth IRAs.

However, once you turn 50, you’re allowed to make additional tax-deductible contributions to traditional IRAs, helping you build wealth faster

For the 2024 tax year, those 50+ could contribute an extra $1,000 to their accounts. If you go this route, you could lower your taxable income by $8,000 with the added benefit of saving more for retirement.

Unlimited IRA contributions after age 70 1/2

Vitalii Vodolazskyi/Adobe savings in jar with ira label

You can continue to contribute to an IRA even after you leave the workforce, though you have to adhere to the same contribution limits as you did before retirement — that is, until you reach age 70 1/2. 

Once you hit that age, your contributions are no longer limited. You can add as much as you want to your retirement accounts without restriction.

Penalty-free IRA withdrawals

denis_vermenko/Adobe happy senior woman holding money

While individuals are allowed to make withdrawals from IRAs before they retire, those withdrawals are usually subject to a 10% tax penalty (with a handful of exceptions for certain pressing financial emergencies).

However, once you turn 59 1/2, you may start withdrawing money from your IRAs without incurring the penalty fee. You’ll still need to report any withdrawals as income — but you’ll only have to worry about typical income taxes, not an extra tax penalty.

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Catch-up contributions for HSAs

Andrii Yalanskyi/Adobe HSA blocks money bag with stethoscope

Health savings accounts (HSAs) are tax-advantaged accounts that usually go hand-in-hand with high-deductible insurance plans. 

For the 2024 tax year, individuals are allowed to contribute up to $4,150 to an HSA. Families on high-deductible insurance plans may contribute up to $8,300. The amount you don’t use during the year rolls over.

As with traditional IRAs, older individuals are allowed to contribute an extra $1,000 per person to their HSAs once they reach age 55. This means you can contribute $5,150 to your HSA if you have self-only health coverage or $9,300 if you have family coverage.

Penalty-free HSA withdrawals for non-medical expenses

Andrii/Adobe HSA Health savings account sticky note

Typically, funds from HSAs must be used to cover specific medical expenses. If you withdraw the funds for another purpose, you’ll be hit with a 20% tax penalty — unless you’re at least 65. 

At that age, you can withdraw HSA funds to use for any purpose, not just medical expenses. You’ll pay a typical income tax on any withdrawn funds, but no additional tax penalty will apply.

Additional standard deduction

seanlockephotography/Adobe United States 1040 Tax Form rules

Many U.S. taxpayers qualify for the IRS’s “standard deduction,” which is a set dollar amount deducted from your gross income to lower your overall taxable income for the year. 

For the 2024 tax year, that deduction will be $14,600 if you file as an individual or are married but filing separately. The standard deduction rises to $29,200 for those who are married and filing jointly.

However, if you celebrate your 65th birthday before the end of the tax year (or are already over 65), you qualify for a higher standard deduction on that year’s taxes. 

For the 2024 tax year (for taxes filed in 2025), you’ll get an extra $1,950 added to your standard deduction. Married couples filing jointly get an extra $1,550 per person.

The standard deduction also increases if either you or your qualifying spouse is blind.

Qualified charitable distributions made directly from IRAs

Daniel/Adobe senior man working remotely on laptop

Once you turn 73, your IRAs are subject to the required minimum distributions (RMDs). This means you’ll need to start withdrawing a certain amount of funds from any traditional IRAs and reporting those funds as taxable income.

However, if you’re at least 70 1/2, you can use money from your IRA to make a qualified charitable distribution (QCD). The money you donate won’t be taxed — but it will count toward your required minimum distribution, which can keep your tax burden manageable.

State-based property tax relief

InsideCreativeHouse/Adobe female Investment advisor consulting retired woman

Some states offer property tax benefits for elderly property owners. Benefits differ from state to state, so you’ll need to check with your state government to find out if property tax relief is available and, if it is, how much tax assistance you qualify for.

Free tax counseling through TCE

Robert Kneschke/Adobe senior couple consulting female finance advisor

No matter how many years old (or young) you are, taxes are complicated. Luckily, once you turn 60, the federal government offers additional tax-filing assistance through the Tax Counseling for the Elderly (TCE) program. 

Plus, in most cases, you should be able to file your taxes for free once you reach senior status. Check the IRS’s TCE locator tool to find your closest TCE location.

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Bottom line

InsideCreativeHouse/Adobe senior couple consulting female finance advisor

Aging can come with many financial challenges, but taxes don’t have to be among them. 

As you approach retirement, take advantage of these nine age-related tax breaks. Every penny saved counts toward a more financially solid future.

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Author Details

Michelle Smith Michelle Smith has spent a decade writing for and about small businesses. She specializes in all things finance and has written for publications like G2 and SmallBizDaily. When she's not writing for work at her desk, you can usually find her writing for pleasure near large bodies of water.

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