5 Important Tax Breaks for Retirees To Plan For in 2025
Written by
Jennifer Taylor
Edited by
Amber Barkley
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When you’re on a fixed income, every dollar counts. Therefore, it’s important to take full advantage of tax breaks that can put money back in your pocket.
Some of these tax breaks are available to everyone, while others are only offered to taxpayers of a certain age. Here’s a look at five important tax breaks retirees should have on their radar for 2025.
Tax Deductions for Medical Expenses
“The IRS allows you to deduct your unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI),” said Matthew J. Mancini, CFP, ChFC, AEP, wealth planning team leader at Wilmington Trust. “In other words, any medical expense that you are paying out of pocket can be used a tax deduction for that year, as long as those expenses surpass 7.5% of your AGI.”
For example, if your AGI is $100,000, he said you could deduct expenses that exceed $7,500.
“Some expenses that qualify are your typical doctor, hospital, prescription and dental expenses, as well as insurance premiums for medical and qualified long-term care policies,” he said. “Unfortunately, this is only an available deduction if you itemize your deductions on Schedule A, and the expense must not be reimbursed — like from a health savings account or flexible spending account.”
Qualified Charitable Distributions
If you’re at least age 70 ½, you can make a qualified charitable distribution (QCD) from a traditional IRA, Mancini said.
“Generally, when you are in retirement and distribute funds from your traditional IRA, those funds get added to your taxable income for the year,” he said. “One tax perk the IRS allows, however, is the ability to distribute funds out of your IRA directly to a qualified charity, and those funds are then distributed tax-free for you.”
As an added benefit, any amount — up to $108,000 per person in 2025 — distributed to charity using this strategy can be counted toward your required minimum distribution for the year, he said.
Increased Standard Deduction
“If you do not itemize your deductions, you get the IRS’ allowable standard deduction,” Mancini said. “For 2025, a married couple filing joint has a standard deduction of $30,000.”
However, he said taxpayers aged 65 and up can get an additional $1,600 per person or $3,200 for a married couple.
“This can help retirees offset a little bit more income, whether that be Social Security, capital gains or taxable IRA distributions,” he said.
Reverse Mortgage
Available to taxpayers aged 62 and up who own a home, a reverse mortgage is a loan the bank makes to you, using your equity in the property, Mancini said.
“The big benefit for the retiree is that the payments made to you are not taxable, nor do they have to be repaid as long as you are alive and living in the home,” he said. “In the right situations, this could mimic a tax-free pension to the retiree and help them avoid taking more taxable distributions than are required from their retirement accounts.”
Part-Time Job 401(k) Contributions
“Many retirees decide to work somewhere part-time,” said CJ Stermetz, CFP, CEP, founder of Equity For The Win (EquityFTW), a fee-only and advice-only firm in Silicon Valley, California. “If they do and there’s a company 401(k) they’re eligible to participate in, they can likely roll their outside IRAs and other 401(k) [plans] into their company’s 401(k).”
He said doing this makes it possible to defer taking your required minimum distribution (RMD) until you’re done working. The ability to defer RMDs and give yourself more time to complete Roth conversions can offer a big boost to your retirement income, he said.
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