Most retirees assume tax season means writing a check to the IRS. But 2026 brings significant
new tax breaks—and if you know what to look for, you might be entitled to a substantial refund
instead.
After 25+ years of retirement tax planning, I’ve seen countless situations where retirees
overpaid their taxes simply because they weren’t aware of deductions, credits, or withholding
strategies available to them. And with the One Big Beautiful Bill Act signed in July 2025, there
are even more opportunities to reduce your tax bill.
Here are eight ways retirees can potentially get money back from the IRS—including two
brand-new provisions many people don’t know about yet.
1. NEW FOR 2025: Claim the $6,000 Senior Deduction
(Age 65+)
This is the big one most retirees don’t know about yet. The One Big Beautiful Bill Act, signed in
July 2025, created a brand-new deduction of up to $6,000 for individuals age 65 or older
($12,000 for married couples where both spouses are 65+).
What makes this special:
● Available for tax years 2025 through 2028
● You can claim it whether you itemize OR take the standard deduction
● It’s IN ADDITION TO the existing senior standard deduction increase
● Both working and retired seniors qualify
Income limits:
● Single filers: Begins phasing out at $75,000 MAGI, fully eliminated at $175,000
● Married filing jointly: Begins phasing out at $150,000 MAGI, fully eliminated at $250,000
Real-world impact: A married couple (both 65+) with $80,000 in combined income could see
their federal tax bill reduced by approximately $1,320-$2,640 depending on their tax bracket.
How it works with Social Security: While marketed as “No Tax on Social Security,” this
doesn’t eliminate taxes on Social Security benefits. Instead, it provides a deduction that can
significantly reduce overall taxable income. For many lower-income retirees who rely primarily
on Social Security, this deduction may reduce their federal tax liability to zero.
Planning opportunity: If you turned 65 anytime in 2026 and have been withholding taxes all
year at your pre-65 rate, you may be due a significant refund when you file in 2026.
2. NEW FOR 2025: Deduct Tip Income If You’re Still
Working Part-Time
Many retirees work part-time in service industries—restaurants, golf courses, salons, delivery
services, and more. If you’re receiving tips, you may qualify for a substantial new deduction.
The “No Tax on Tips” provision allows you to deduct up to $25,000 in qualified tip income for tax
years 2025-2028.
Who qualifies:
● Workers in occupations that “customarily and regularly” received tips as of December
2024
● Includes: servers, bartenders, hairstylists, barbers, valets, delivery drivers, golf caddies,
casino dealers, and many others
● Both cash and credit card tips qualify (must be voluntary, not mandatory service
charges)
Income limits:
● Phases out starting at $150,000 MAGI for single filers ($300,000 for married filing jointly)
How to claim for 2025: Since this law was enacted mid-year, the IRS is providing transition
relief. You can calculate your deductible tips using pay stubs, W-2s, 1099 forms, or other
documentation. Starting in 2026, tips must be separately reported on tax forms.
Example: A retiree working part-time as a restaurant server earning $15,000 in tips could
potentially deduct the full amount, saving $1,650-$3,750 in federal taxes depending on their tax
bracket.
3. Adjust Your Withholding to Avoid Giving the IRS an
Interest-Free Loan
Many retirees have too much tax withheld from their Social Security benefits, pension
payments, or IRA distributions throughout the year. While getting a refund might feel good,
you’re essentially lending money to the government at 0% interest.
The opportunity: Review your withholding at least annually. If you’re consistently getting large
refunds, you’re overwithholding. You could reduce your withholding and keep more money in
your pocket throughout the year.
How to adjust:
● Social Security: File Form W-4V to change withholding (you can choose 7%, 10%, 12%,
or 22%)
● Pensions: Submit a new W-4P to your pension administrator
● IRA distributions: Adjust withholding when you take distributions, or change it with your
custodian
Real benefit: Getting a $6,000 refund means you overpaid by $500 per month. That money
could have been earning interest in your accounts or covering monthly expenses.
4. Claim Medical Expenses You Didn’t Know Were
Deductible
Healthcare costs in retirement can be substantial. According to Fidelity’s 2025 estimate, a
couple retiring at 65 can expect to spend approximately $345,000 on healthcare throughout
retirement.
The good news? Medical expenses exceeding 7.5% of your adjusted gross income (AGI) are
deductible if you itemize.
What many retirees miss:
● Medicare Part B and Part D premiums (deductible if you itemize)
● Medigap/Medicare Supplement premiums
● Dental and vision care not covered by Medicare
● Hearing aids and batteries
● Prescription eyeglasses
● Long-term care insurance premiums (subject to age-based limits)
● Mileage to and from medical appointments (21 cents per mile for 2025)
● Medical conferences related to a chronic condition
● Home improvements for medical necessity (ramps, grab bars, etc.)
Example scenario: If your AGI is $100,000 and you had $15,000 in qualified medical
expenses, you could deduct $7,500 ($15,000 – $7,500 threshold). At a 22% tax bracket, that’s a
potential $1,650 tax savings.
5. Take Advantage of Qualified Charitable Distributions
(QCDs)
If you’re 701⁄2 or older and charitably inclined, QCDs can provide significant tax benefits while
supporting causes you care about.
A QCD allows you to transfer up to $100,000 per year directly from your IRA to a qualified
charity. The distribution counts toward your Required Minimum Distribution (RMD) but isn’t
included in your taxable income.
Why this matters:
● Reduces your AGI (unlike claiming a charitable deduction)
● Can help you avoid or reduce IRMAA (Medicare premium surcharges)
● Doesn’t require itemizing deductions
● Satisfies your RMD requirement without increasing taxable income
Common mistake to avoid: If you already took your RMD for the year, you can’t retroactively
convert it to a QCD. The QCD must be done before you take your regular distribution.
6. Recover Excess IRMAA Payments Through
Life-Changing Events
Medicare Income-Related Monthly Adjustment Amounts (IRMAA) are surcharges added to your
Medicare Part B and Part D premiums based on your income from two years prior.
The challenge? Your income two years ago might not reflect your current situation.
Life-changing events that qualify for IRMAA appeals:
● Marriage, divorce, or death of spouse
● Work stoppage or reduction
● Loss of income-producing property
● Loss or reduction of pension income
● Employer settlement payment
How it works: If you experienced a qualifying event and your income decreased, you can file
Form SSA-44 to request a redetermination. If approved, Social Security will adjust your IRMAA
prospectively. While this isn’t technically a “refund,” it reduces future premium costs.
7. Claim the Credit for the Elderly or Disabled
Many retirees don’t know about the Credit for the Elderly or Disabled (Schedule R). While it’s
relatively small and has income limitations, it’s worth checking if you qualify.
Eligibility:
● You’re 65 or older by the end of the tax year, OR
● You’re under 65, retired on permanent and total disability, and received taxable disability
income
Income limits for 2025:
● Single filers: AGI under $17,500
● Married filing jointly (both spouses qualify): AGI under $25,000
● Married filing jointly (one spouse qualifies): AGI under $20,000
The credit maxes out at $7,500 in eligible income, potentially worth up to $1,125, though the
actual amount is typically less due to phaseouts.
8. Review Prior Years for Missed Opportunities
You can amend prior year tax returns to claim overlooked deductions or credits. You generally
have three years from the original filing date to file an amended return.
Commonly missed items worth reviewing:
● State tax refunds that weren’t taxable but were reported as income
● Excess Social Security withholding (if you had multiple employers)
● IRA contributions that weren’t properly deducted
● Roth conversion recharacterizations (for older tax years)
● Investment expenses or tax preparation fees (limited circumstances)
● Educator expenses if you were teaching in retirement
● Energy-efficient home improvements (various credits available depending on the year)
How to amend: File Form 1040-X for each year you’re amending. Be prepared to document
why you’re entitled to the refund.
Bonus Tip: Consider State Tax Planning
Don’t forget about state taxes. Some strategies that reduce federal taxes also reduce state
taxes, but not always.
State-specific opportunities:
● Some states don’t tax Social Security benefits
● Some states offer pension income exclusions
● Property tax credits for seniors vary significantly by state
● Some states offer senior-specific deductions
Research your state’s specific tax benefits for retirees—they can add up.
The Bottom Line
2025 brings unprecedented tax-saving opportunities for retirees, especially with the new $6,000
senior deduction and the no-tax-on-tips provision. But these new benefits are
temporary—they’re only available through 2028.
Most retirees focus on minimizing their tax bill at filing time. But the real opportunity is in
proactive planning throughout the year.
Action steps for 2025:
● If you’re 65+ and still having taxes withheld, adjust your withholding NOW to account for
the new $6,000 deduction
● If you work part-time in a tipped occupation, track your tips carefully to maximize the
deduction
● Review your medical expenses quarterly to see if you’re approaching the 7.5% threshold
● Consider QCDs if you’re charitably inclined and over 701⁄2
● Don’t be afraid to amend prior returns if you discover mistakes
The IRS isn’t going to call and tell you you’re overpaying. It’s up to you—or your tax advisor—to
find these opportunities.
Remember: Tax planning isn’t just for the wealthy. These strategies can benefit anyone in or
approaching retirement who wants to keep more of their hard-earned money.
About the Author
Kurt Supe is a CPA and retirement planner with CFD Investments, Inc. Registered Broker
Dealer and Creative Financial Designs, Inc., Registered Investment Adviser, with over 25 years
of experience.
Important Disclosures
This content is for educational and informational purposes only and should not be construed as
personalized tax, financial, or legal advice. Tax laws are complex and change frequently.
Individual results will vary based on your unique circumstances, including income, deductions,
filing status, and state of residence. Before implementing any tax strategy or making financial
decisions, please consult with a qualified tax professional or CPA who can evaluate your
specific situation. Kurt Supe is a CPA specializing in retirement tax planning but does not
prepare tax returns. Past results and examples do not guarantee future outcomes.
For additional information and disclosures, visit www.creativefinancialgrp.com