Retirement Retired Life

8 Tax Deductions Retirees Should Never Overlook

These sometimes overlooked tax breaks can help retirees stretch their income further and keep more money in their pockets each year.

By Adam Palasciano , Edited by Laura Hohenstein

Updated Oct. 16, 2026

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Many retirees expect their tax burden to shrink once they leave the workforce, but that doesn't always happen. In fact, retirement often brings new types of income and expenses, which can affect how much you owe at tax time.

The good news? There are several deductions that can help lower your taxable income, if you know where to look. Here are some of the most overlooked tax breaks that could make a real difference in retirement.

Keep in mind that several of these breaks only help if you itemize, meaning your total itemized deductions need to be higher than the standard deduction. For 2026, the standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly. If you're 65 or older, you also get an additional $2,050 if you're single or $1,650 per qualifying spouse if you're married.

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New $6,000 senior deduction

If you're 65 or older, you may qualify for a new deduction of up to $6,000 per person under the One Big Beautiful Bill Act. Married couples where both spouses are 65 or older can deduct up to $12,000.

Best of all, you can claim it whether or not you itemize, and it's in addition to the standard deduction and the existing extra deduction for seniors. It's available for tax years 2025 through 2028.

There are a few rules to know:

The deduction starts to phase out once your modified adjusted gross income (MAGI) is above $75,000, or $150,000 for joint filers
Married couples must file jointly to claim it
You'll need to include a valid Social Security number for each person claiming it

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Medical and dental expenses over 7.5% of AGI

If your itemized deductions exceed the standard deduction ($16,100 single or $32,200 joint for 2026), the IRS allows you to deduct qualified medical expenses that are more than 7.5% of your adjusted gross income (AGI). That threshold may be easier to reach in retirement, especially if your income is lower and your medical costs are higher.Eligible expenses include:

Doctor and dental visits
Surgeries
Prescriptions
Long-term care services

For some retirees, this deduction alone could add up to thousands in savings.

State and local tax (SALT) deductions

The One Big Beautiful Bill Act raised the cap on SALT deductions from $10,000 to $40,000, and the limit rises slightly each year. For 2026, you can deduct up to $40,400 ($20,200 if married filing separately). That's good news for retirees in high-tax states or those with significant property taxes.

If you itemize, you can deduct your property taxes plus either your state income taxes or your sales taxes, whichever is greater, up to the limit.

Higher earners get a smaller benefit. For 2026, the cap starts to shrink once your MAGI is above $505,000 ($252,500 if married filing separately), though it can't drop below $10,000. The higher cap is temporary and is scheduled to return to $10,000 in 2030.

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Charitable contributions

Donating to qualified charities can reduce your taxable income if you itemize. This includes:

Cash donations
Non-cash gifts
Appreciated assets like stocks

For retirees, using a donor-advised fund (DAF) can also streamline larger or ongoing charitable giving, while avoiding capital gains taxes on appreciated investments.

Starting in 2026, you can also deduct cash gifts to qualified charities even if you don't itemize, up to $1,000 for single filers or $2,000 for married couples filing jointly. Gifts to donor-advised funds don't count toward this deduction. If you do itemize, only the portion of your gifts above 0.5% of your AGI is deductible.

Tax prep fees for rental, farm, or self-employment income

Most tax prep costs are no longer deductible, but there's an exception for retirees who earn rental, farm, or self-employment income. If part of what you pay a tax preparer (or spend on tax software) goes toward preparing Schedule C, E, or F, you can deduct that portion as a business expense on the relevant schedule.

Because it's deducted on the schedule itself, you don't need to itemize to claim it. This can be a valuable break for retirees who own rental units, run a small farm, or do freelance or consulting work in retirement.

Medicare premiums for the self-employed

Still working as a consultant, freelancer, or sole proprietor? If you report self-employment income, you may be able to deduct your Medicare Part B, Part D, and Medicare Advantage premiums.

This tax break can offset rising health care costs and make part-time work in retirement even more worthwhile.

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Long-term care insurance premiums

Premiums for qualified long-term care insurance policies count as medical expenses, so they can help you reach the 7.5% of AGI threshold if you itemize. If you're self-employed, you may be able to deduct them without itemizing.

The amount you can count depends on your age. For 2026, the limits per person are:

Age 40 or under: $500
Age 41 to 50: $930
Age 51 to 60: $1,860
Age 61 to 70: $4,960
Age 71 and older: $6,200

Because the limit rises with age, this deduction becomes more valuable the longer you hold coverage.

Investment interest expense

If you've borrowed money to invest, such as through a margin loan, the interest may be deductible. You can deduct up to the amount of your net investment income, which includes capital gains, dividends, and other investment earnings.

This deduction can be especially valuable for retirees with larger portfolios and more complex investment strategies.

Home sale exclusion when downsizing

Selling your home in retirement? You may qualify for the home sale capital gains exclusion, which allows:

Individuals to exclude up to $250,000
Married couples to exclude up to $500,000

To qualify, you must have owned and lived in the home for at least two of the past five years. This is one of the most generous and underutilized tax breaks available to retirees looking to downsize.

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Bottom line

Retirement doesn't mean your tax planning days are over. In fact, the more you understand your potential deductions, the better your chances of reducing your taxable income and keeping more of what you've saved.

Start with the breaks you can claim without itemizing, like the new $6,000 senior deduction. Then compare your medical expenses, state and local taxes, and charitable gifts against the standard deduction to see whether itemizing makes sense. A little planning can help you make the most of every tax season and put extra cash in your pocket for what matters most.

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Editor's Note: Portions of this story were drafted with assistance from generative AI tools. All final creative decisions, edits, and fact-checking were done by human writers and editors.