Tax Breaks After 50 You Can't Afford to Miss

Let's say your salary is $75,000. Contribute 6 percent of your income — $4,500 — and your taxable income will be reduced to $70,500. At your 2024 tax rate of 22 percent, that would cut your income tax bill by $990.

Remember, this applies to a traditional IRA or 401(k). Retirement contributions to a Roth IRA or Roth 401(k) are made on an after-tax basis. You get no up-front tax break for these contributions, but the qualifying withdrawals that you take in retirement will be tax-free. When you contribute pretax money to a traditional IRA or a 401(k), it will grow tax-free, but you'll be liable for taxes once you start making withdrawals in retirement.

Keep in mind that the tax deduction you receive may be limited if you are covered by a workplace retirement plan (or your spouse is) and your income exceeds certain limits. Under IRS rules, for 2024:

• A single taxpayer with a retirement plan at work can’t deduct any of their IRA contributions if their modified adjusted gross income (MAGI) is $87,000 or more. (MAGI is your adjusted gross income, minus certain deductions, such as student loan interest.)
• For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the MAGI cut-off is $143,000.
• If an IRA contributor is not covered by a workplace retirement plan but has a spouse who is, there’s no deduction at a MAGI of $240,000 or more.

Roth IRAs also have income limits. For 2024, a single taxpayer can’t deduct a Roth contribution if their MAGI is $161,000 or more. For married couples filing jointly, the cut-off is $240,000.

When it comes to catch-up contributions for a traditional IRA or Roth IRA, you have until the tax-filing deadline to make a deductible contribution — that is, you can count a contribution against your 2024 taxes if you make it by April 15, 2025. However, 401(k)s, 403(b)s, Thrift Savings Plans and most 457 plans go by the calendar year; to deduct those contributions, you must make them by Dec. 31.

2. Ease the pain of RMDs

Obviously, the longer you tap your retirement savings, the less you’ll have over your lifetime, and the greater the odds of outliving your money. Nevertheless, you can’t leave it untouched forever. You’ll probably have to face required minimum distributions (RMDs), a federally set  minimum amount you must annually withdraw from a tax-deferred retirement plan, such as a traditional IRA. (Roth IRAs don't require distributions while the owner is alive.)

Under rules that took effect in 2023 under the SECURE 2.0 Act, you can wait until the year in which you reach age 73 before you must start taking RMDs. Previously, the age was 72. For your first RMD, you can delay it until April 1 of the following year, but after that you’ll have to take your RMD by the end of each calendar year.

If you don't need the RMD, consider donating it to charity. Donate your RMD to a qualified charity directly from your retirement account and you won't owe income tax on the distribution, up to $100,000.

3. Max out your HSA

Another often overlooked opportunity lies in health savings accounts (HSAs) that employers offer, says Brenna Baucum, founder of Collective Wealth Planning in Salem, Oregon.

“For those in their 50s, HSAs offer a unique advantage," she says. "By contributing to your HSA, you prepare for future health care expenses and enjoy a triple tax benefit — tax-deductible contributions [from your gross income], tax-free growth, and tax-free withdrawals for qualified medical expenses.”

Also, there's a small catchup on the health savings account, $1,000, that Sandi Weaver, owner of Weaver Financial in Mission, Kansas, reminds her clients to make use of once they reach 55:  “We get an immediate tax deduction for that catchup, plus for the basic HSA contribution itself.”

Plus, the account is yours: You can take it with you to a new job and use the funds in retirement.

For 2024, you can contribute up to $4,150 if you have coverage for yourself, or up to $8,300 for family coverage, plus the additional $1,000 catchup if you reach 55 during the year. However, your contribution limit will be reduced by any amount your employer contributed that has been excluded from your income.

4. Enjoy a larger standard deduction at 65

You can look ahead to an additional tax benefit down the road. The standard deduction, which reduces your taxable income and, in turn, lowers your tax bill, will be larger once you reach 65.

In 2025, when you fill out your federal income tax forms for income earned in 2024, if you’re married and filing jointly, you’ll get a standard deduction of $29,200. If you’re a single taxpayer, or a married and filing separately, the standard deduction rises to $14,600.

However, if you are 65 or older and file as a single taxpayer, you get an extra $1,950 deduction for tax year 2024. Married and filing jointly or separately? The extra standard deduction is $1,550 for each person who is qualified.  For taxpayers who are both 65-plus and blind, the extra deduction is $3,900 if you are single and $3,100 for each qualifying spouse in a married couple.

Other deductions

The high standard deduction means that for most people, it’s not worthwhile to itemize — unless your individual deductions are large or many, they won’t add up to more than your standard deduction.

But you can deduct some expenses without itemizing, thanks to above-the-line deductions, which are deductible from your gross income before calculating your adjusted gross income (AGI). For example, you can deduct student loan interest that you paid in the 2024 tax year.

Other above-the-line deductions include:

Teacher expenses. Individuals can deduct up to $300 in unreimbursed teaching expenses, and married couples can deduct $600, assuming both are educators.

Self-employed health insurance. If you’re self-employed, you can deduct the premiums for medical, dental, vision and long-term care insurance.

Alimony payments. The law used to allow those who paid alimony to deduct their payments. No longer. But there’s one loophole: If your divorce or separation agreement was signed before Dec. 31, 2018, you can deduct alimony paid.

Military moving expenses. Active-duty members of the military can deduct their moving expenses when they move because of a permanent change of station.