3 Tax-Planning Mistakes Retirees Too Often Make
Tax-cutting strategies change once you retire, and some ideas that helped while you were working no longer apply once you start taking Social Security and RMDs. Don't make these three common mistakes.


Tax planning for retirees may sound simple on the surface. Since they typically have lower incomes and fewer deductions compared with many taxpayers, they don't face such a comprehensive range of tax issues, right? Well, not exactly.
Not Considering Taxability of Social Security
Many people believe that Social Security is not taxable. This is not entirely accurate. In fact, up to 85% can be subject to income tax.
Retirees with minimal income will not pay federal taxes on their benefits. However, if they have additional income, a percentage becomes taxable. Retirees need to calculate their “provisional income” as follows:

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
- Take your adjusted gross income (excluding Social Security)
- Add any tax-free interest received (typically municipal bond interest)
- Add to that total 50% of your Social Security benefit
If the income is below $25,000 for single filers or $32,000 for joint filers, your benefits are all tax-free. If the provisional income is between $25,000 and $34,000 as a single filer or between $32,000 and $44,000 as a joint filer, you are taxed on up to 50% of your Social Security benefits. However, if your provisional income exceeds $34,000 as a single filer or $44,000 as a joint filer, you will be taxed on up to 85% of your benefits.
I would recommend that retirees review taxable income annually with their tax adviser to determine if any additional income impacts the taxation of Social Security. This may also put the taxpayer in a higher tax bracket. If careful planning is not completed, the result could be an unpleasant surprise come tax time.
Summary
Tax planning for retirees may not be as simple as you think. Seniors face different circumstances compared with younger taxpayers.
But with careful planning and understanding your tax situation so you can minimize your tax liability and sleep at night. Don’t fall victim to tax strategies that will cost more tax at the end of the day.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Paul Sundin is a CPA and tax strategist. With a worldwide client base, he specializes in tax planning and tax structuring for individuals, entrepreneurs and the real estate industry. In addition to being a CPA, he is also an author, speaker and consultant. His professional mission is to educate taxpayers on tax strategies and personal finance.
-
The Five Social Security Blind Spots Retirees Often Miss
Understand how benefits work before applying, so you don’t lose money for which you qualify.
-
Stock Market Today: S&P 500, Nasdaq Hit New Highs After Vietnam Trade Deal
Ahead of a key July 9 tariff deadline, President Trump said the U.S. has reached a trade deal with Vietnam.
-
Social Security's First Beneficiary Lived to Be 100: Will You?
Ida May Fuller, Social Security's first beneficiary, retired in 1939 and died in 1975. Today, we should all be planning for a retirement that's as long as Ida's.
-
An Investment Strategist Demystifies Direct Indexing: Is It for You?
You've heard of mutual funds and ETFs, but direct indexing may be a new concept ... one that could offer greater flexibility and possible tax savings.
-
Q2 2025 Post-Mortem: Rebound, Risks and Generational Shifts
As the third quarter gets underway, here are some takeaways from the market's second-quarter performance to consider as you make investment decisions.
-
Why Homeowners Should Beware of Tangled Titles
If you're planning to pass down property to your heirs, a 'tangled title' can complicate things. The good news is it can be avoided. Here's how.
-
A Cautionary Tale: Why Older Adults Should Think Twice About Being Landlords
Becoming a landlord late in life can be a risky venture because of potential health issues, cognitive challenges and susceptibility to financial exploitation.
-
Home Equity Evolution: A Fresh Approach to Funding Life's Biggest Needs
Homeowners leverage their home equity through various strategies, such as HELOCs or reverse mortgages. A newer option: Shared equity models. How do those work, and what are the pros and cons?
-
Eight Tips From a Financial Caddie: How to Keep Your Retirement on the Fairway
Think of your financial adviser as a golf caddie — giving you the advice you need to nail the retirement course, avoiding financial bunkers and bogeys.
-
Just Sold Your Business? Avoid These Five Hasty Moves
If you've exited your business, financial advice is likely to be flooding in from all quarters. But wait until the dust settles before making any big moves.