The Internal Revenue Service introduced a new deduction for the 2025 tax year to ease the retirees' tax burden. Individuals 65 and older may claim $6,000, while joint filers can receive $12,000 if both qualify. The benefit phases out above a modified adjusted gross income of $75,000 for single filers and $150,000 for a joint tax return, helping older adults manage rising costs and retirement income through 2028.
The IRS guidance reminds retirees that withdrawals from most retirement accounts are subject to income tax. This includes money taken from 401(k) and 403(b) plans, profit-sharing plans, simple IRAs, and other defined contribution plans. Distributions from employer-sponsored retirement plans and individual retirement arrangements, such as a traditional IRA, are generally taxable. However, some qualified distributions from Roth IRAs and accounts may be tax-free or even income-tax-free if eligibility requirements are met.
The rules also cover how Social Security income and Social Security benefits are treated for federal income taxes. Depending on total retirement income and filing status, a portion of these benefits may need to be reported, particularly for Social Security recipients with higher income. The IRS highlights that qualified medical expenses may offset some taxable amounts. For accuracy, taxpayers are encouraged to review worksheets and consult a trusted tax advisor before preparing their annual tax return.
A major change for retirees in 2025 involves updates to required minimum distributions (RMDs). The SECURE 2.0 Act raised the required beginning date to age 73, giving retirees additional time before mandatory withdrawals from retirement accounts begin. According to the IRS, the first RMD must be taken by April 1 of the year after reaching the new threshold age. Retirees who choose to delay taking RMDs until that point will still need to take their second distribution by December 31 of the same calendar year, which could result in two taxable withdrawals in one year.
The IRS stresses that required minimum distribution requirements apply broadly to 401(k), 403(b), profit-sharing plans, IRA-based plans, and other defined contribution arrangements. If a plan participant dies, different rules apply depending on whether there is a designated or sole beneficiary. Penalties for failing to meet the required deadline have been reduced to 25% of the minimum amount not withdrawn and to as low as 10% if corrected promptly.
Every account owner is responsible for following RMD rules, which means calculating the minimum withdrawal amount using the IRS uniform lifetime table. Retirees with multiple retirement funds must ensure each account is separately accounted for to satisfy annual requirements. To help, the IRS provides worksheets, calculators, and a detailed minimum distributions FAQs page. These tools guide taxpayers as to when to begin taking RMDs and how the timing of withdrawals can affect their overall retirement benefits.
The agency warns that missing the deadline may lead to excise taxes, even if corrected later. The IRS advises consulting a trusted tax advisor because tax treatment differs across individual retirement arrangements, Roth accounts, and traditional IRAs. Professional guidance can help retirees avoid costly mistakes and align their withdrawals with long-term planning goals.
The IRS guidance explains that Social Security income and other retirement benefits may count toward federal tax obligations depending on filing status and total income. For some social security recipients, part of their benefits becomes taxable, especially at higher income levels set by the Social Security Administration.
These calculations can also affect Medicare premiums. Large withdrawals from retirement accounts in the same calendar year may push retirees into a bracket where monthly costs increase. The IRS advises older adults to review planning strategies with a tax advisor and balance withdrawals from Roth IRAs, 403(b) accounts, and other defined contribution plans to reduce the risk of higher premiums while staying compliant.
The IRS reminds older adults to monitor deadlines such as December 31 for withdrawals and the April 15 tax return filing date. Missing the first RMD or overlooking minimum distribution rules can lead to penalties, even when corrected later. Choosing the right filing status—single filers or joint tax return—also affects how much is owed in federal income taxes.
To stay compliant, retirees should consult a tax advisor when planning distributions from retirement accounts such as Roth IRAs, 403(b) plans, and individual retirement arrangements.
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