Save Money With These Hidden Tax Breaks for Retirees and Seniors Over 65

Reaching retirement means you now have time to follow your dreams, but it’s a big adjustment that can be difficult to navigate emotionally—not to mention financially. Between changes in income sources, healthcare costs, and evolving tax laws, it’s easy for retirees to miss deductions and credits specifically designed for people age 65 and older. Once you stop working, your income looks different, your expenses shift, and the tax rules that applied before may not be the ones working in your favor now.

The good news is the U.S. tax code includes several valuable but often overlooked tax breaks for seniors, some of which can significantly reduce your taxable income. Understanding how they work—and when they apply—can help you keep more money for your goals. Read on to learn more about the ones that matter most, so you can hold onto more of what you've worked hard to save.

The extra standard deduction for seniors

Before looking at more specialized strategies, let’s start with the most common—and most widely missed—tax break for people over 65: the extra standard deduction.

For context, the standard deduction is the portion of your income that isn’t subject to federal income tax. It’s available to everyone who doesn’t itemize deductions. For the 2026 tax year, the standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly.

If you’re 65 or older by the last day of the tax year, you qualify for an additional standard deduction on top of the base amount:

• $2,050 for single filers or heads of household
• $1,650 per person for married couples filing jointly ($3,300 extra if both are over 65)

Note that the additional deduction is doubled for those who are legally blind. This means many seniors can reduce their taxable income substantially without itemizing a single expense.

The new Enhanced Deduction for Seniors

Recent legislation added an entirely new layer of tax relief. For tax years 2025 through 2028, a temporary bonus deduction is available for seniors:

• $6,000 for single filers
• $12,000 for married couples filing jointly, if both spouses qualify

This bonus comes on top of the increased standard deduction for seniors. According to the IRS, to be eligible for it, you must be 65 or older on or before the last day of the tax year. The benefit also phases out once modified adjusted gross income (MAGI) exceeds:

• $75,000 for those filing single.
• $150,000 for those filing jointly.

Keep in mind that even with partial phase-outs, this deduction can meaningfully reduce your tax bill.

Out-of-pocket medical costs

Healthcare expenses often rise in retirement—and fortunately, the tax code recognizes that reality.

Medicare premiums and long-term care premiums for self-employed seniors

If you’re retired but are still earning self-employment income—perhaps you’re consulting, freelancing, or running a small business—you may qualify for a special deduction. Self-employed seniors may be able to deduct long-term care premiums as part of the self-employed health insurance deduction. The deduction is subject to age-based limits (i.e., up to $4,960 for ages 61 to 70 and $6,200 for ages 71 and older).

Self-employed seniors may be able to deduct Medicare premiums for:

• Medicare Part B,
• Medicare Part D,
• Medicare Advantage (Part C), and
• Medigap supplemental policies.

What makes this especially valuable is these premiums can be deducted without itemizing, reducing your adjusted gross income (AGI) directly. The deduction cannot exceed the earned income your business generates, and it cannot be claimed if your business operates at a loss or breaks even.

Medical expenses exceeding 7.5 percent of adjusted gross income

If you do itemize deductions, you may be able to deduct qualified medical expenses that exceed 7.5 percent of adjusted gross income, according to the IRS. Eligible expenses must be for the diagnosis, cure, mitigation, treatment, or prevention of disease and may include:

• Doctor and hospital bills,
• Prescription medications,
• Dental and vision care,
• Long-term care services or costs related to medical care in a nursing home (within IRS limits), and
• Medical equipment and devices (e.g., prescription eyeglasses, hearing aids, etc.).

Expenses typically not deductible include funeral or burial costs and reimbursed expenses (such as those paid from an HSA). For retirees with high healthcare costs, “bunching” medical expenses into a single year can sometimes make itemizing worthwhile.H2: Tax breaks for seniors giving financial gifts to charity

Giving back can align with both your personal values and smart tax planning.

Giving to charity and qualified charitable distribution

Once you reach age 70½, you can donate directly from an IRA to a qualified charity through a qualified charitable distribution (QCD). In 2026, you can transfer up to $111,000. This comes with several key advantages:

• The distributed amount is never counted as taxable income.
• Satisfies RMDs: QCDs can count toward required minimum distributions (RMDs) once you reach your mandatory RMD age of 73 or 75, (depending on your birth year).
• Potential tax savings: Lower taxable income may reduce taxes on Social Security benefits (which are up to 85 percent taxable) and help to limit Medicare premium surcharges.While QCDs don’t generate a deduction, the exclusion from income often produces a greater overall tax benefit than making a direct cash donation and claiming a charitable deduction, due to the new limit that applies in 2026 to compute the allowable charitable deduction.

The Saver’s Credit and Saver’s Match

Retirement doesn’t necessarily mean the end of retirement contributions—especially if you are still earning income.

2026 and earlier: Saver’s Credit

If you have earned income from part-time work or consulting, you may qualify for the Saver’s Credit.This is a nonrefundable credit of up to $1,000 for single filers and up to $2,000 for joint filers based on your retirement contributions and AGI. It directly reduces tax owed as opposed to taxable income.

2027 and beyond: Saver’s Match

Beginning in 2027, the Saver’s Credit will be replaced by the Saver’s Match, introduced under the SECURE 2.0 Act.

If your modified AGI is below $20,500 (or $41,000 for joint filers), the U.S. Treasury will provide a 50 percent match on the first $2,000 per person contributed to a qualifying retirement account. That’s up to $1,000 deposited directly into your account; however, the match percentage gradually phases down to 25 percent and then 10 percent before phasing out completely at AGI of $35,500 ($71,000 for joint filers). And unlike the Saver’s Credit, this is not a tax credit—you simply receive the money via the U.S. Treasury Department depositing the matching funds directly into the eligible retirement account(s)

Spousal IRA tax breaks

Even if one spouse is retired, couples may still unlock IRA tax benefits for the nonworking spouse. A spousal IRA allows a working spouse to fund an IRA up to the limit for a spouse who has little or no earned income, provided the couple files jointly and has sufficient earned income reported to support the contribution. Benefits include:

• Contributions can reduce taxable income.
• Both spouses maintain retirement accounts.
• Continued tax-deferred or tax-free growth (depending on IRA type).

This strategy is often overlooked, but it can increase retirement savings and create additional tax-advantaged assets over time.

Tax planning still matters in retirement

Tax planning doesn’t stop at retirement—it often becomes even more important. From the increased standard deductions to charitable strategies and healthcare-related write-offs, seniors have access to a range of tax breaks that reward planning and awareness.

Don’t forget to review your state’s tax breaks as well. Retirees and individuals age 65 and older can access a range of valuable tax breaks, deductions, exclusions, and methods to reduce taxable income or retain more retirement income, though the specific benefits vary by state.

Because the rules can change and interact in complex ways, your financial advisor can help ensure your tax strategy supports your broader retirement goals. This means you can focus less on taxes and more on the life you’re building in retirement.

This publication is not intended as legal or tax advice. This information was compiled by The Northwestern Mutual Life Insurance Company. It is intended solely for the information and education. It must not be used as a basis for legal or tax advice, and is not intended to be used and cannot be used to avoid any penalties that may be imposed on a taxpayer. Northwestern Mutual and its financial representatives do not give legal or tax advice. Taxpayers should seek advice regarding their particular circumstances from an independent legal, accounting, or tax advisor. Tax and other planning developments after the original date of publication may affect these discussions.