Age plays a pivotal role in several tax credits, deductions, and rules — sometimes for the better.
Did you know that several tax credits, deductions, and rules hinge on your age? For instance, age might determine how much you can deduct on your federal tax return for long-term care insurance premiums. In other cases, your age dictates when you must begin complying with specific rules that affect your tax liability, such as taking required minimum distributions (RMDs).
Knowing which tax regulations and benefits link to which ages can aid in tax planning and potentially reduce your tax burden before and during retirement.
To get you started, here is a list of six tax breaks that change as you get older and the associated ages at which you can become eligible. As always, and in any case, if you are unsure whether any tax provision, credit, or deduction applies to you, consult a trusted tax professional or financial advisor.
Extra tax breaks for people 50 or older
Note: The following is a short list of some common tax changes and amounts that depend, at least in part, on your age. This list is not exhaustive, meaning it does not include all tax provisions triggered by age nor all tax credits and deductions available for (or rules applicable to) people 50 and older.
Contribution limits over 50
If you are 50 or older, you can take advantage of catch-up contributions to retirement accounts such as IRAs and 401(k)s. These contributions allow additional savings beyond standard annual contribution limits, which can help bolster your retirement funds.
According to the IRS, the limit on annual contributions to an IRA increased to $7,000 for 2024, up from $6,500 for the 2023 tax year. The SECURE 2.0 Act changed the IRA catch‑up contribution limit for individuals age 50 and over to include an annual cost‑of‑living adjustment but remains $1,000 for 2024. (So, the total annual IRA contribution if you are 50 and older is up to $8,000.)
The 401(k) catch-up contribution limit for employees age 50 and older and those participating in 403(b) and most 457 plans and the federal government’s Thrift Savings Plans is $7,500 for 2024.
- Participants in 401(k), 403(b), and most 457 plans, as well as the federal government’s Thrift Savings Plan who are 50 and older, can contribute up to $30,500 in 2024. (That’s the $23,000 limit plus the catch-up of $7,500.)
- The catch-up contribution limit for employees 50 and over participating in SIMPLE plans is $3,500 for 2024.
Note on a catch-up contributions change for high earners: Under the SECURE 2.0 Act, passed a couple of years ago, if you are at least 50 and earned $145,000 or more in the previous year, you can make catch-up contributions to your employer-sponsored 401(k) account. But there’ is a catch. Beginning in 2026, you must make those extra contributions on a Roth basis, using after-tax money.
- When the IRS implements the rule, you won’t be able to get tax deductions on those catch-up contributions as you would with typical 401(k) contributions.
- But you could withdraw the money tax-free when you retire.
- The SECURE 2.0 Roth catch-up contribution rule won’t apply to taxpayers making $144,999 or less in a tax year.
What about HSA contribution limits? If you are 55 or older by the end of the tax year, the IRS says you can increase your annual HSA contribution by up to $1,000 a year. As Kiplinger has reported, the IRS announced record-high HSA contribution limits for 2024. Individuals can contribute up to $4,150 to their HSA accounts for 2024, and families can contribute up to $8,300.
Early withdrawal penalty
People age 59½ and older can make penalty-free withdrawals from traditional IRAs and 401(k)s, avoiding the usual 10% early withdrawal penalty. Penalty-free withdrawals can give you more flexibility in accessing retirement savings and managing finances.
- Qualified distributions (i.e., from a Roth account at least five years old since you first contributed and when you are 59½ years or older) are tax-exempt.
Additionally, if you are 65 and older, you can withdraw HSA funds for non-medical expenses without paying the additional tax penalty. However, ordinary income tax rates apply to distributions for medical expenses other than qualified ones.
Free tax help
The IRS offers tax counseling for people age 60 and older. (If you have a joint tax return, only one spouse must meet the age threshold.) This counseling program, known as TCE, or Tax Counseling for the Elderly, operates in partnership with the AARP Foundation’s Tax-Aide program. It utilizes IRS-certified volunteers specializing in pensions and other retirement-related concerns unique to older adults. The IRS provides an online lookup tool to find a TCE provider.
There are also several other ways to file taxes for free this tax season, not tied to age. For more information, see Ways to Free File Your Taxes This Year.
Extra standard deduction: 65 and older
Once you turn 65, you become eligible for an additional standard deduction on top of the regular standard deduction. This extra deduction reduces taxable income, potentially lowering overall tax liabilities and allowing retirees to keep more of their hard-earned money.
However, the amount of this extra standard deduction can vary based on factors like filing status and whether you or your spouse are 65 or older. Another factor is whether you or your spouse is blind.
- If you have yet to file your 2023 tax return, the additional standard deduction for the 2023 tax year is $1,850 if you are single or file as head of household. If you are married, filing jointly or separately, the extra standard deduction amount is $1,500 per qualifying individual.
- If you are 65 or older and blind, the 2023 extra standard deduction is $3,700 if you are single or filing as head of household. It’s $3,000 per qualifying individual if you are married, filing jointly or separately.
- For information on the extra standard deduction amounts for 2024 (tax returns you’ll file in 2025), see Kiplinger’s report: The Extra Standard Deduction for 65 and Older.
Charitable IRA rollover: QCDs
If you are 70½ or older, you can make qualified charitable distributions (QCDs) directly from your IRA to eligible charitable organizations. These distributions can be helpful for retirees who want to support charitable causes while minimizing their tax liability. QCDs fulfill required minimum distributions (RMDs) without being included in adjusted gross income (AGI).
- QCDs are not subject to tax.
- You can benefit from a QCD even if you claim the standard deduction. (However, a QCD is not deductible as a charitable contribution.)
- There are other rules to follow and a limit: For 2024, the IRA QCD limit is $105,000. For the 2023 tax year (if you haven’t yet filed), the limit is $100,000. For married couples, each spouse can exclude up to the limit for a total, for the 2023 tax year, of up to $200,000 and for 2024, up to $210,000.
A note on RMDs: Due to changes brought about by the SECURE 2.0 Act, 73 is the age at which you must start taking distributions from retirement savings accounts (other than Roth IRAs). You have until April 1 of the following year to take your first required minimum distribution. Different RMD rules may apply to inherited IRAs.
Source: https://www.kiplinger.com/taxes/tax-breaks-that-come-with-age
