Deductions for Seniors: Standard vs. Itemized

After you calculate your total taxable income, you can reduce it by taking deductions. This is a critical step in lowering your final tax bill. Most people have a choice between taking the “standard deduction” or “itemizing” their deductions.

The Standard Deduction for Seniors

The standard deduction is a specific dollar amount, set by the government each year, that you can subtract from your income. It is the simplest option, as it requires no record-keeping of individual expenses.

As a key benefit, the tax code provides a higher standard deduction for taxpayers who are age 65 or older, or who are legally blind. You get an additional amount for each qualification. For example, a married couple where both spouses are over 65 would receive two of these additional amounts on top of the base standard deduction.

Itemizing Your Deductions

Itemizing means you add up all your individual, eligible expenses from the year. If the total is greater than your available standard deduction, you are better off itemizing. Common itemized deductions for retirees include:

Medical and Dental Expenses: You can only deduct the amount of medical expenses that exceeds 7.5% of your Adjusted Gross Income (AGI).

State and Local Taxes (SALT): This includes property taxes and either state income tax or sales tax, but the total SALT deduction is capped at $10,000 per household per year.

Home Mortgage Interest: If you still have a mortgage, the interest may be deductible.

Charitable Contributions: Donations to qualified charities can be deducted.

A Break-Even Example: Standard vs. Itemizing

Let’s consider a simple example. Meet Clara, who is 70, single, and files her own taxes for Tax Year 2024. The standard deduction for a single person in 2024 is $14,600. Because she is over 65, she gets an additional $1,950. Her total standard deduction is $14,600 + $1,950 = $16,550.

Now, Clara adds up her potential itemized deductions for the year:

State and local property/income taxes: $7,000

Mortgage interest: $6,000

Charitable donations: $2,000

Deductible medical expenses (after AGI limit): $2,500

Her total itemized deductions are $7,000 + $6,000 + $2,000 + $2,500 = $17,500.

In this case, Clara’s itemized deductions ($17,500) are greater than her available standard deduction ($16,550). She would save money on her taxes by choosing to itemize. If her total had been less than $16,550, she would have been better off taking the simpler standard deduction.