Some Things Get Better with Time
Fine wine, balsamic vinegar, cheese, and certain tax breaks have something in common. They can get better with age. Case in point: consider this sample list.
RETIREMENT PLAN CONTRIBUTIONS
If you’re 50 or older, catch-up contributions allow you to add an additional $1,000 to qualified retirement accounts, such as IRAs and 401(k)s. Contribution limits are based on modified adjusted gross income and begin to phase out at higher income levels.
HIGHER HEALTH SAVINGS ACCOUNT (HSA) LIMITS
Similarly, qualified individuals aged 55 or older may increase deferrals to HSAs by up to $1,000 for an annual contribution of $5,150 (single) or $9,300 (family) versus $4,150 and $8,300 for younger taxpayers with qualified high-deductible medical plans.
NO WITHDRAWAL PENALTIES
At age 59 1/2, you’re no longer subject to the usual 10% early withdrawal penalty on withdrawals from IRAs and 401(k) plans. At 65, you may withdraw HSA funds for non-medical expenses without paying an additional tax penalty. However, ordinary income tax rates apply to unqualified medical expenses.
AN EXTRA STANDARD DEDUCTION
Once you turn 65, you become eligible for an additional standard deduction. The extra deduction reduces taxable income, potentially lowering your overall tax liability. The amount of this extra standard deduction can vary based on filing status and whether you or your spouse are 65 or older. Another factor is whether you or your spouse is blind. Generally, for 2024, the deduction amounts are $1,950 if you’re single or file as head of household and $1,550 each for married, filing jointly or separately. They double for taxpayers 65 and older and blind.
This list isn’t all-encompassing. If you’re unsure whether any tax provision, credit, or deduction applies to you, consult a trusted tax professional.
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