The IRS allows no specific tax exemptions for senior citizens, either when it comes to income or capital gains. The closest you can come is contributing to a Roth IRA or Roth 401(k) with after-tax dollars, allowing you to make qualified withdrawals on a tax-free basis.
An easy and impactful way to reduce your capital gains taxes is to use tax-advantaged accounts. Retirement accounts such as 401(k) plans, and individual retirement accounts offer tax-deferred investment. You don't pay income or capital gains taxes on assets while they remain in the account.
Increased Standard Deduction
Once you're 65 or older, the standard deduction increases. For the 2024 tax year (filed in 2025): Single or married filing separately: $15,00. Married filing jointly or qualifying widow(er): $30,000.
Who qualifies for 0% capital gains in 2025. Starting in 2025, single filers can qualify for the 0% long-term capital gains rate with taxable income of $48,350 or less, and married couples filing jointly are eligible with $96,700 or less. However, taxable income is significantly lower than your gross earnings.
Unfortunately, there's no age limit to paying capital gains tax. However, you can manage and even reduce your tax burden with the right strategies and information. Here are the basics about capital gains tax rules and rates as well as some tax-saving tactics.
Social Security and capital gains
Keep in mind that up to 85% of Social Security benefits can be subject to tax depending on your overall income, including capital gains. The calculation that determines how much of your Social Security benefits are taxable includes realized gains.
IRS extra standard deduction for older adults
For 2024, the additional standard deduction is $1,950 if you are single or file as head of household. If you're married, filing, jointly or separately, the extra standard deduction amount is $1,550 per qualifying individual.
You won't get out of paying property taxes entirely but the senior freeze will stop property taxes in their tracks. You may want to sell your home someday for a variety of reasons but thanks to a property tax exemption, if you do move out it likely won't be because property taxes were too high.
At What Age Can You Stop Filing Taxes? Taxes aren't determined by age, so you will never age out of paying taxes. People who are 65 or older at the end of 2024 have to file a return for tax year 2024 (which is due in 2025) if their gross income is $16,550 or higher.
A few options to legally avoid paying capital gains tax on investment property include buying your property with a retirement account, converting the property from an investment property to a primary residence, utilizing tax harvesting, and using Section 1031 of the IRS code for deferring taxes.
This tax loophole allows property owners to defer capital gains on their sale as long as the proceeds are used to purchase another property within a set time frame.
If it's your primary residence
You can sell your primary residence and avoid paying capital gains taxes on the first $250,000 of your profits if your tax-filing status is single, and up to $500,000 if married and filing jointly. The exemption is only available once every two years.
To limit capital gains taxes, you can invest for the long-term, use tax-advantaged retirement accounts, and offset capital gains with capital losses.
5 Ways to Get Tax-Free Retirement Income
Roth IRA or Roth 401(k) – Roth IRAs and Roth 401(k)s have tax-free qualified withdrawals at retirement since taxes are paid on contributions. Municipal Bonds Income – A fixed-income investment that generates interest payments that are typically exempt from federal taxes.
Extra tax deductions for seniors
If you don't itemize your deductions, you can get an extra standard deduction if you and/or your spouse are 65 years old or older. These are $1,950 for single filers and $1,550 for married individuals filing jointly.
As of 2022, for a single filer aged 65 or older, if their total income is less than $40,000 (or $80,000 for couples), they don't owe any long-term capital gains tax. On the higher end, if a senior's income surpasses $441,450 (or $496,600 for couples), they'd be in the 20% long-term capital gains tax bracket.
Capital gains tax rates
Net capital gains are taxed at different rates depending on overall taxable income, although some or all net capital gain may be taxed at 0%. For taxable years beginning in 2024, the tax rate on most net capital gain is no higher than 15% for most individuals.
A senior property tax exemption reduces the amount seniors 65 years of age or older have to pay in taxes on properties they own.
Have you heard about the Social Security $16,728 yearly bonus? There's really no “bonus” that retirees can collect. The Social Security Administration (SSA) uses a specific formula based on your lifetime earnings to determine your benefit amount.
At what age is Social Security no longer taxable? Social Security income can be taxable no matter how old you are. It all depends on whether your total combined income exceeds a certain level set for your filing status. You may have heard that Social Security income is not taxed after age 70; this is false.
So if you have a big capital gain on your current home, and you sell it at age 63 or later, there's a good chance it might cause your Medicare Part B premium to be higher when that year's tax return is used to determine your Part B premium cost.