Tax Planning for Seniors

Tax Benefits for Seniors

The tax code works in your favor if you are 65 or older. Recent changes in 2026 made it even better for families in Pennsylvania. Let’s walk through what you need to know to keep more of your money.

The Enhanced Deduction for Seniors (New for 2025+)

Most people don't know that being 65 or older now qualifies you for a special enhanced standard deduction on top of the regular amount. This is a significant change starting in 2025. You get an extra $6,000 deduction if you are 65 or older. If you are married and both of you have reached that age, that is $12,000 combined in additional protection for your income.

Here is what this saves you in real dollars:

Imagine a single filer, age 68, earning $35,000. Their breakdown looks like this:

• Regular standard deduction: $16,100
• Age 65+ increase: $2,050
• Enhanced senior deduction: $6,000
• Total deduction: $24,150

Your taxable income drops all the way down to $10,850. If you are in the 12% federal tax bracket, this enhanced deduction saves you about $720 in federal taxes every single year.

Now look at a married couple where both are 65 or older with a $50,000 combined income:

• Regular standard deduction: $32,200
• Age 65+ increases: $3,300
• Enhanced senior deduction: $12,000
• Total deduction: $47,500

That leaves only $2,500 in taxable income. That is powerful tax relief for retirees.

Your Higher Standard Deduction (2026)

As a senior, you automatically get a larger standard deduction than younger filers. Here is the breakdown for the 2026 tax year:

Single, Head of Household, or Qualifying Widow(er) – Age 65+

• Base standard deduction: $16,100 for singles or $24,150 for HOH
• Additional amount for age 65+: $2,050
• Enhanced senior deduction: $6,000
• Your total deduction: $24,150 if single or $32,200 if HOH

Married Filing Jointly – Both Age 65+

• Base standard deduction: $32,200
• Additional amounts for each spouse over 65: $3,300 total
• Enhanced senior deduction: $12,000
• Your total deduction: $47,500

Married Filing Jointly – Only One Spouse Age 65+

• Base standard deduction: $32,200
• Additional amount for the senior spouse: $1,650
• Enhanced senior deduction: $6,000 for the senior spouse
• Your total deduction: $39,850

What this means: You can earn a decent amount of money before you owe even a penny in federal income tax. Because of these high limits, many seniors in our community find they don't need to file at all.

Do You Even Need to File a Tax Return?

Many seniors can stop filing taxes entirely. Check the income thresholds for your situation below. For 2026, you generally do not need to file a federal income tax return if your total income is less than these amounts:

Important exceptions to the rule: You should still file even if your income is below these amounts if you had federal income tax withheld from your retirement income or paycheck. You should also file if you qualify for a refundable tax credit or had self-employment income of $400 or more.

Form 1040-SR: The Senior-Friendly Tax Form

The IRS created Form 1040-SR specifically for people 65 and older. It features larger print that is much easier to read and fewer lines to fill out. It focuses on the items most relevant to seniors and uses simplified schedules. Ask your tax preparer about using this form for better clarity and simplicity.

Required Minimum Distributions (RMDs)

Once you reach age 73, you must start taking money out of your retirement accounts. If you miss these deadlines, the penalties are very steep.

When RMDs Start

At age 73 and older, you must take annual withdrawals from Traditional IRAs, 401(k)s, and other employer plans. The IRS calls these Required Minimum Distributions. If you are still working and participating in your current employer's plan, you might be able to delay this. You should check with your plan administrator to be sure.

Why RMDs Exist

The government let you grow that money without paying taxes while you were working, but now they want their share. RMDs force those distributions and the taxes that come with them starting at age 73.

The Penalty for Missing an RMD

Missing the December 31 deadline is expensive. The penalty is 25% of the amount you were supposed to withdraw. If you owed a $10,000 distribution, that is a $2,500 penalty on top of the regular income tax. We recommend setting your distributions to happen automatically so you never have to worry about this.

How PAC Financial Helps

Calculating the exact RMD is complicated because it depends on your age and account balances. Mistakes are very easy to make. This is one area where our licensed investment team adds real value. We calculate your precise RMD every year and coordinate distributions from all your accounts. We make sure you take them on time to avoid those big penalties and plan the timing to minimize the tax impact.

Social Security and Taxes

Your Social Security benefits are not always taxable, but they can be if you have other sources of income. Proper planning can often reduce this tax burden.

The Rule (Simplified)

If your "combined income" exceeds certain thresholds, up to 85% of your Social Security becomes federally taxable. Combined income is your adjusted gross income plus any nontaxable interest and half of your Social Security benefit.

For 2026:

• Single or Head of Household: Combined income over $25,000
• Married Filing Jointly: Combined income over $32,000

Many retirees end up paying some tax on their benefits, but it is rarely an all or nothing situation. This is where planning matters. The date you claim Social Security and the timing of your IRA withdrawals all affect how much you pay. We can help you coordinate these to keep your taxes as low as possible.

Earned Income Tax Credit for Seniors

If you are still working part-time in retirement, you might qualify for the Earned Income Tax Credit (EITC). This is true even if you are over 65. The rules have expanded lately to make it easier for older workers to qualify. The credit can be $1,000 or more depending on your situation, and it is money that goes right back into your pocket.

Credit for the Elderly or Disabled

If you are 65 or older and your income is below certain limits, you might qualify for the Credit for the Elderly or Disabled. While this credit isn't well known and the income limits are low, it is essentially free money if you qualify. Ask us about this when we review your tax situation.

More Tax-Smart Strategies for Seniors

Charitable Contributions

If you are 70½ or older, you can make a qualified charitable distribution (QCD). This sends money directly from your IRA to a charity. It counts toward your RMD but isn't taxed as income because the money never touches your hands. This is a great way to support causes you care about while lowering your taxable income.

Medical Expenses

Seniors often have higher medical costs, and these may be deductible. You can generally deduct amounts that are more than 7.5% of your adjusted gross income.

Property Tax Deferrals

Pennsylvania allows some seniors with limited income to defer their property taxes. This can be a huge help with cash flow. If you own your home, it is worth checking to see if you qualify.

You Don't Have to Figure This Out Alone

Retirement should be about enjoying your life in Central PA, not stressing over IRS rules. You have more tax breaks available than you might realize, but the key is knowing which ones apply to you.

If you are 65 or older, recently retired, or thinking about when to start Social Security, PAC Financial is here to help. We will walk through exactly what these rules mean for you without the jargon or a sales pitch. We offer straightforward guidance about your money and your taxes. Give us a call today and let’s make sure you aren’t leaving money on the table.

Call us  TODAY for a no-pressure conversation at (717) 564-6400 about your tax strategy.

Important Disclosures

This guide is for educational purposes only and is based on 2026 tax law. Tax laws can change and individual situations vary. This information is not personal tax advice. We strongly recommend consulting with a qualified tax professional or CPA before making decisions. Requirements vary by state and personal circumstances.

PAC Financial is a financial advisory firm located in Harrisburg, PA. Securities and advisory services are offered through Osaic Wealth, Inc. Member FINRA/SIPC. PAC Financial is not independently registered with the SEC as an investment adviser. State limitations may apply.