7 Critical Tax Deductions Middle Class Retirees Need for 2026
Written by
Laura Beck
Edited by
Brendan McGinley
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Tax season feels different when you’re retired. You’re not chasing W-2s from multiple employers or worrying about 401(k) plan contribution limits anymore. But that doesn’t mean you’re done looking for ways to lower your tax bill.
Middle-class retirees face unique tax situations that most financial advice glosses over. You might be drawing from multiple income sources, paying Medicare premiums or trying to figure out how charitable donations work now that you’re taking the standard deduction.
Here are seven critical tax deductions retirees need to know about for 2026, straight from tax professionals who work with clients in your exact situation.
The Senior Deduction (Age 65 and Older)
If you’re 65 or older, you qualify for a temporary deduction that most retirees don’t even know exists yet. Andy Evans, a financial advisor at Edward Jones in Houston, said that the new tax bill created “a new senior (age 65 and up) temporary deduction (2025-2028) made available through the bill, which allows up to $6,000 in income deductions to qualifying taxpayers who make below a certain income threshold.”
This is separate from your standard deduction. If you qualify based on income, that’s an extra $6,000 coming off your taxable income. Work with your tax professional to see if you meet the requirements.
HSA Withdrawals for Medicare Premiums
Most people think Health Savings Accounts (HSAs) are only useful when you’re working. Not true. Evans recommended that retirees “consider using any Health Savings Account savings for qualified medical expenses (which includes paying Medicare premiums) to take advantage of tax-free income for healthcare in retirement.”
Those Medicare premiums add up fast. Part B costs most people around $200 per month in 2026. If you’ve got HSA funds sitting there, use them tax-free to cover those costs instead of paying out of pocket.
Charitable Donations Without Itemizing
Here’s a game changer for 2026. You no longer have to itemize deductions to get a tax break for charitable giving. David Leichter, CEO of Leichter Accounting Services, said that with the new law, “if you file your personal tax return using the Standard Deduction (as most people do), you can claim $1,000 of cash contributions if you are filing Single or $2,000 if you are filing Married Filing Joint.”
Carlos Aguirre, a certified financial counselor with Peninsula Family Service, confirmed this applies starting with 2026 tax returns filed in 2027. This matters because most retirees take the standard deduction. Now you can get credit for charitable giving without the hassle of itemizing.
Qualified Charitable Distributions from Your IRA
If you’re 70.5 or older and have required minimum distributions from your IRA, this strategy can save you serious money. Evans said retirees should “consider making Qualified Charitable Distributions (QCD) from your Individual Retirement Accounts (IRA). QCDs can satisfy your Required Minimum Distributions (RMD) and are excluded from adjusted gross income.”
Here’s why that matters. Normally when you take your RMD, it counts as taxable income. But if you send that money directly from your IRA to a qualified charity, it satisfies your distribution requirement without increasing your adjusted gross income. Lower AGI can mean lower Medicare premiums and less tax on Social Security benefits.
Tax Loss Harvesting
The stock market doesn’t always cooperate with your retirement timeline. If you’re sitting on losing investments, use them strategically. Evans advised retirees to “consider harvesting tax losses for current year offsets of capital gains or to claim a $3,000 loss this year as an income deduction and carry the rest forward.”
Matt Green, an IRS enrolled agent who runs Ledger Medial Accounting Services, agreed that retirees should “sell stocks at a loss to offset any gains that may occur in the same calendar year.”
This is especially useful if you rebalance your portfolio or sell appreciated assets. Offset those gains with losses and reduce your tax bill.
Traditional IRA Contributions (If You’re Still Working)
Just because you’re retired doesn’t mean you’ve stopped earning income completely. Many retirees work part-time, consult or take on seasonal jobs. If that’s you, pay attention to this deduction.
Aguirre said that “contributions to a traditional IRA are considered ‘above-the-line’ deductions (adjustments to income). This means taxpayers can claim the deduction even if they take the standard deduction.”
Even better, “you have until April 15, 2026, to make IRA contributions for the 2025 tax year, giving you time to figure out the most beneficial contribution amount,” Aguirre said. For 2025, you can contribute $8,000 if you’re 50 or older.
If you’re still earning some income in retirement, maxing out an IRA contribution could drop you into a lower tax bracket. Aguirre pointed out that contributions “reduce your adjusted gross income (AGI) on a dollar-for-dollar basis, which could put you in a lower tax bracket.”
Car Loan Interest Deduction
Planning to buy a car? The timing might save you money. Leichter said that “if you purchase a car in 2025 and until 2028, you may deduct the interest paid on the car loan as well. That could amount to hundreds of dollars a year in deductible interest expense.”
This is a new deduction that many retirees don’t know about yet. If you were planning to finance a vehicle anyway, you’ll get some of that interest back at tax time.
The Bottom Line
Evans summed it up best when he said to “consult your financial advisor and qualified tax professional to help you determine the overall strategy that’s right for you.”
Every retiree’s tax situation is different based on income sources, where you live and how you’re drawing down savings. But these seven deductions apply to many middle-class retirees and could save you thousands.
Green pointed out that “a quick rule is that you will save around 20% of the amount you are able to utilize as a deduction.” That means a $6,000 senior deduction could save you $1,200 in taxes. Small changes add up when you’re living on a fixed income.
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