Tax Reform & Retirees
Although there wasn’t a change to how Social Security payments are taxed, or the amount of taxes due on retirement plan withdrawals, the larger standard deduction is likely to be beneficial to most retirees.
The tax reform law almost doubles the allowed standard deduction – $24,000 (married filing jointly) and $12,000 (individual). For younger people, itemizing their charitable contributions, state taxes, and mortgage interest often provides the most tax benefit. But, for retirees without a mortgage, this increased standard deduction may be the best choice.
The tax reform bill also kept the “additional standard deduction” that was available for those at least 65 years of age. This additional deduction is $1,300 each for married couples, or $1,600 if filing individually.
Because of the changes to the standard deduction, many retirees can plan on keeping more of their money, even after the tax bill eliminated the personal exemption.
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