Tax Tips For Seniors

Top Tax Tips for Seniors

Updated on Nov 02 2018

Interview with Kristine Nelson, CPA, MPAcc

Tax Day is around the corner, so if you haven’t filed yet—time is ticking. Growing older qualifies you for a variety of tax perks that aren’t available to younger Americans; but knowing which pertains to your unique situation can be tricky.

Tax expert Kristine Nelson, CPA, MPAcc offers her professional insight to help you navigate taxes with confidence.

The average American Household Misses Tax-Savings Opportunities

According to the IRS, the average American’s tax refund in 2017 was $2,763.1 Many Americans had to pay the government money instead of receiving a refund, though, as they did not pay enough taxes throughout the year. Seniors can be especially vulnerable when it comes time to file taxes as they have less deductions and dependents, and don’t always know the benefits available to them.

Nelson discusses how many households overlook or are unaware of tax savings opportunities:

“When I bring on new clients, I’ll review their past year returns. The opportunities to save generally include fully-funding their 401k with pre-tax dollars, or at a minimum funding to receive the full employer match. Many clients also have Health Savings Accounts, and the contributions for these are pre-tax. Since they incur medical expenses regardless, it makes sense to fund these with pre-tax dollars, and the account grows tax-free. I encourage my clients to take their annual raise and fund the above two accounts if they aren’t already contributing the maximum. Different states also offer tax savings opportunities. A professional can help find savings clients didn’t even know were there.”

Kristine points out that there are other opportunities for savings that are not intuitive. Whether you’re frequenting the doctor’s office, caring for a spouse or elder relative, or making home improvements to accommodate new medical devices, today’s baby boomers are in a better position than ever to benefit from medical and health insurance-related tax deductions.

Here are some of Kristine’s favorite tax tips for seniors.

Tax Tips for Americans Approaching Retirement

As you approach retirement, there are a number of tax considerations to keep in mind.

Social Security Benefits

It’s important to understand the rules and determine when you should start receiving Social Security benefits. You can start receiving benefits as early as age 62, or as late as age 70. There is a reduction in benefits if you start receiving benefits before your full retirement age. If you choose to collect benefits early, and you decide to work part-time before your full retirement age, be aware that there is an earnings threshold. In 2018, Social Security recipients who earn more than $17,040 will have $1 withheld for every $2 of benefits received above that limit. Once you reach your full retirement age, you can earn as much as you want. Visit the Social Security Benefits Planner to learn more about getting benefits while working and how this affects your taxes.

Traditional vs. Roth IRA

If you have a large traditional IRA, and you are approaching retirement, it may make sense to convert, or part, all of that traditional IRA into a Roth IRA in your early retirement years – or over a series of years. The best time to do the conversion is when you are at a lower effective tax rate. While you will pay tax on the growth of the account at conversion, the funds will not be taxable when you use them. Roth IRAs are not subject to the Required Minimum Distribution (RMD) rules while the owner is alive. It is important to discuss whether this makes sense for your unique situation with a CPA.

Medical Part B Insurance

In addition to Medicare insurance, many seniors purchase supplemental insurance and prescription drug coverage. It’s important to understand what Medicare Part B covers and whether or not supplemental insurance makes sense for you. If supplemental insurance does make sense, it’s important to have a discussion with someone who is well-versed with the different policy options. For your taxes, medical premiums are counted as medical expenses on Schedule A – Itemized Deductions. Medical expenses that exceed 7.5% of adjusted gross income are deductible. After 2018, the threshold increases to 10%.

Tax Tips for Retirees

Here are some helpful tax tips for retirees filing their 2017 taxes.

Taxable Social Security Benefits

Up to 85% of your Social Security Benefits may be taxable. It’s important to be aware of the income thresholds for planning purposes. Visit the Social Security Benefits Planner for specifics.

Required Minimum Distributions

When you reach 70.5 years, you are required to take required minimum distributions (RMDs) from your traditional IRA, SEP IRA, SARSEP, Simple IRA, and all employer sponsored retirement accounts (profit-sharing plans, 401(k) plans, 403(b) plans, and 457(b) plans. The exception is that RMD rules do not apply to a Roth IRA while the owner is alive. The rules do apply to Roth 401(k) accounts. Learn more about IRS retirement plan and IRA required minimum distributions to find out what applies to you.

Medicare Premiums

Your Medicare Part B premiums are based on your modified adjusted gross income. While the base premium stays the same for 2018 at $134 a month, a large percentage of Social Security recipients will see their premiums rise due to the cost of living adjustment. It’s important to plan for the rise in premiums cash-flow wise.


If you prefer to have your taxes withheld rather than pay in quarterly estimated tax payments, this needs to be communicated. Nelson notes, “If my clients’ answer is the former, we’ll communicate to make sure that amount is withheld from their income sources, such as social security benefits and/or RMDs so that there are no surprises.”

Tax Time and What’s Right for You

Instead of having your taxes be a chore, consider April a time when you expect some extra money—if you do your due-diligence. Finding a CPA you can trust helps not only set you up for tax success, but also retirement success as you can get a ‘big-picture’ financial overview.

Nelson discusses the importance of getting a financial plan started:

“Every article I’ve read indicates that Americans are not saving enough for their futures. There is no ‘one size fits all’ financial plan as it depends on many variables such as projected living and medical expenses in retirement, how often you plan on replacing your car, travel costs in retirement – and the list continues. A personal financial advisor can help you make all these inquiries, check your risk tolerance, review current retirement savings and projected Social Security benefits, and then make a yearly plan for savings opportunities. Meeting on a recurring basis helps keep finances on track as well as give you peace of mind.”

There’s no time like the present. Invest in your future with the help of a professional to get gain the financial confidence you need to make sure you’re prepared for not only tax season, but also retirement.

About Kristine Nelson

Kristine Nelson

Kristine Nelson, CPA MPACC is a Certified Public Accountant (CPA) with a practice in Duvall, WA. She grew up on a farm in Eastern Washington, has always loved math, and enjoys meeting and interacting with her customers to help them reach their unique financial goals.

Kristine graduated from Central Washington University with a Bachelor of Science in Accounting and, after working several years in the field, went back to school and graduated from the University of Washington with a Master of Professional Accounting (MPAcc) degree. She has been helping clients with their tax consulting and compliance needs since she became a CPA in 1997, and enjoys helping them minimize their taxes while offering a sensible, actionable perspective on their personal finances.

1Frankel, Matthew. (May, 2017). The Average American’s 2017 Tax Refund – And How They’ll Spend It. Retrieved March 20, 2018, from

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