What Seniors Need to Know:Taxes on Social Security & Retirement Income

Social Security and the New Senior Tax DeductionBy Senior Tax Advisory GroupTax law changes may help retirees keep more of their income. However, headlines about no tax on Social Security can create confusion. We want seniors to understand what has changed and how the new rules fit their retirement plans.The One Big Beautiful Bill Act created a temporary additional deduction for people age 65 and older. For tax years 2025 through 2028, eligible individuals may deduct up to $6,000. Married couples filing jointly may deduct up to $12,000 when both spouses qualify. There could be a ROTH conversion opportunity at No Additional Tax Cost!This deduction is available whether you itemize or take the standard deduction. Married taxpayers must file jointly to claim it, and each person claiming the deduction must have a qualifying Social Security number.Income limits matter. The deduction begins phasing out when Modified Adjusted Gross Income exceeds $75,000 for an individual or $150,000 for a married couple filing jointly. Taxable IRA withdrawals, capital gains, or Roth conversions may reduce the deduction available.The law did not repeal federal taxation of Social Security benefits. Depending on your combined income, up to 85% of benefits may still be included in taxable income. The new deduction reduces taxable income; it does not change the formula determining how much Social Security is taxable. Eligibility also does not require receiving Social Security.For example, a qualifying couple with both spouses age 65 or older could receive the full $12,000 deduction. If that entire deduction offsets income otherwise taxed at 12%, their federal tax savings would be $1,440. Actual savings depend on their tax situation.Before making withdrawals or changing withholding, review your income and eligibility. Social Security claiming decisions still deserve coordination with taxes, savings, and survivor needs. We believe retirement planning begins with understanding people. Contact Senior Tax Advisory Group at 719-596-4844 or visit www.springstax.com for help evaluating these changes within your retirement plan.

Required Minimum Distributions Explained: What Seniors Need to Know Each YearIf you have a traditional IRA, 401(k), or similar tax-deferred retirement account, the IRS eventually requires you to start withdrawing money from it whether you need the cash or not. These withdrawals are called Required Minimum Distributions, or RMDs, and getting them wrong can be costly. Here's what to know.What Is an RMD?An RMD is the minimum amount you're required to withdraw each year from certain retirement accounts once you reach a specific age. The rule exists because these accounts let your money grow tax-deferred for decades the IRS eventually wants its share, so it requires withdrawals (which are taxed as ordinary income) to begin at a set point.RMDs generally apply to: Traditional IRAs SEP and SIMPLE IRAs 401(k), 403(b), and most other employer-sponsored retirement plans RMDs do not apply to Roth IRAs during the original owner's lifetime, and as of 2024, Roth 401(k) and Roth 403(b) accounts no longer require RMDs either.What Age Do RMDs Start?The starting age has changed more than once in recent years under the SECURE Act and SECURE 2.0, so its worth checking which rule applies to you based on your birth year: Born 1950 or earlier: RMD age is 73 Born 19511959: RMD age is 73 Born 1960 or later: RMD age is 75 Because the rules phased in over several years, it's easy to be working from outdated information especially if you read something a few years ago. When in doubt, confirm your specific required beginning age rather than assuming.The First-Year Deadline Is a Little DifferentYour very first RMD comes with a special option: you can delay it until April 1 of the year after you reach your RMD age, rather than taking it by December 31 of the year you turn that age.The catch: if you delay that first withdrawal, you'll need to take two RMDs in that same calendar year the delayed one and the current year's which can push you into a higher tax bracket. For many people, taking the first RMD by December 31 of the year they reach RMD age, rather than waiting, actually results in a smoother tax picture.After your first RMD, all future ones are due by December 31 each year.How Is Your RMD Calculated?Your RMD is based on your account balance as of December 31 of the prior year, divided by a life expectancy factor from an IRS table (most people use the Uniform Lifetime Table). The result is your required withdrawal for the year. If you have multiple IRAs, you calculate the RMD for each one separately but can withdraw the total from any single IRA or combination of them. 401(k) accounts generally don't allow that same flexibility each 401(k) typically requires its own withdrawal.What Happens If You Miss One?Missing an RMD, or withdrawing less than required, comes with a real penalty: a 25% excise tax on the amount you should have withdrawn but didn't. That penalty can be reduced to 10% if the mistake is corrected within two years. Given how steep the penalty is, it's worth building a reliable system or working with someone who tracks it for you rather than relying on memory alone.A Strategy Worth Knowing: Qualified Charitable DistributionsIf you're charitably inclined, a Qualified Charitable Distribution (QCD) lets you transfer funds directly from your IRA to a qualifying charity. That amount can satisfy some or all of your RMD for the year without counting as taxable income which can help keep your adjusted gross income lower, potentially reducing how much of your Social Security is taxed and help avoid higher Medicare premium brackets. This is generally available starting at age 70, even though it's tied to satisfying RMDs that begin later.Why This Deserves Yearly AttentionRMDs aren't a "set it and forget it" task. Your required amount changes every year as your balance and life expectancy factors change, and a distribution can ripple into other parts of your tax return affecting how much of your Social Security is taxable, your Medicare premium bracket, and your overall tax bill. Reviewing your RMD strategy annually, rather than treating it as a single calculation, often uncovers opportunities to plan more efficiently.Want help calculating your RMD or building it into your broader tax strategy? Contact Zunic Advisory Services we're happy to walk through where you stand.

Tax rules shift as you move into retirement, and not always in ways that are obvious. Between federal provisions aimed at older taxpayers and Pennsylvania-specific programs, there are a number of tax breaks seniors qualify for but don't always claim sometimes simply because they don't know they exist. Here's a rundown worth reviewing.1. The Additional Standard Deduction for Age 65+If you or your spouse are 65 or older, you're entitled to a higher standard deduction than younger taxpayers. This is automatic if you claim it correctly when filing, but it's easy to miss if you're using outdated software, an old return as a template, or filing without noting your age.2. Pennsylvania's Retirement Income ExclusionOne of the most overlooked advantages of retiring in Pennsylvania: the state generally does not tax retirement income, including distributions from 401(k)s, IRAs, pensions, and Social Security, provided you meet the retirement age and eligibility requirements for the plan. Many retirees moving from other states are surprised by how favorable this treatment is but it only helps if your return reflects it correctly.3. Property Tax/Rent Rebate ProgramPennsylvania offers a Property Tax/Rent Rebate Program for eligible older adults and residents with disabilities, providing rebates on property taxes or rent paid during the year. Eligibility is based on income and age, and the application is separate from your standard tax return meaning it's easy to file your taxes and never realize you also qualified for this rebate.4. Medical and Dental Expense DeductionsHealthcare costs often rise in retirement, and medical expenses above a certain percentage of your adjusted gross income can be deducted if you itemize. This can include: Long-term care insurance premiums (subject to age-based limits) Certain home modifications for medical needs Mileage to and from medical appointments Portions of Medicare premiums Many seniors don't itemize because they assume the standard deduction is automatically better but for those with significant medical costs, it's worth running the numbers both ways.5. Credit for the Elderly or DisabledThis federal credit is aimed at taxpayers 65 or older (or those who are retired on permanent disability) who fall under certain income thresholds. It's a narrower credit with specific income limits, which is likely why it's frequently overlooked but for those who qualify, it can meaningfully reduce a tax bill.6. Charitable Contributions from an IRA (Qualified Charitable Distributions)For those 70 or older, a Qualified Charitable Distribution allows you to transfer funds directly from an IRA to a qualifying charity. This can satisfy some or all of a Required Minimum Distribution without the amount counting as taxable income a strategy that's often more advantageous than donating cash and claiming a deduction, especially for those who no longer itemize.Why These Get MissedMany of these breaks live in different places some are automatic line items, some require a separate application, and some depend on choices like itemizing versus taking the standard deduction. It's easy for a return prepared quickly or based on last year's template to miss one or more of them, especially as personal circumstances change year to year.A Second Look Can Be Worth ItIf you're not confident your recent returns captured everything you were eligible for, it may be worth a review sometimes amended returns can recover missed savings from prior years, depending on filing deadlines.Not sure whether you're getting the full benefit of these programs? Schedule a tax consultation with Zunic Advisory Services, proudly serving south central Pennsylvania since 2004.