Filing taxes can feel like a chore for most of us, but for retirees, it presents unique challenges. If you’re retired, your tax situation likely involves several moving parts

• investments, 
• Social Security, 
• and Required Minimum Distributions (RMDs). 

As a Certified Financial Planner working with high earners and high-net-worth retirees, I want to help make sure you’re prepared. In this insight, we’ll walk through five key tax issues you should consider before you file your 2024 return.

---

1. Required Minimum Distributions (RMDs) and Taxable Income

RMDs can be tricky. If you’ve turned 73 or older (or inherited an IRA), the government expects you to start taking withdrawals from your retirement accounts. 

Missing these distributions can lead to a penalty of up to 25% of the amount you should have taken. Ouch! 

Make sure you’ve withdrawn the right amount and that it’s reported correctly on your tax return (Form 1040, Lines 4a, 4b, 5a, and 5b).

It’s also worth noting that if you don’t need your RMD for living expenses, you can use strategies like a Qualified Charitable Distribution (QCD) to reduce your taxable income (more on that later).

Related Read: What Factors Impact My Required Minimum Distributions?

Tip:

If you’re not sure how to calculate your RMD or where to report it, consulting a financial planner advisor can save you time, and potentially money in penalties. Here’s a good guide on key tax and financial numbers for 2025 that you might find helpful.

---

2. Investment Income and Capital Gains Taxes

Many retirees rely on investment income, whether it’s from interest, dividends, or capital gains. If you have substantial investments, you may be subject to the 3.8% Net Investment Income Tax (NIIT). 

This tax kicks in if your Modified Adjusted Gross Income (MAGI) is over $200,000 (single) or $250,000 (married filing jointly). For high-net-worth individuals, it’s essential to keep track of capital gains and losses on investments. 

You’ll want to report capital gains (Form 1040, Line 7) accurately. Don’t forget to review Schedule D to ensure any carryover losses are accounted for. It can help reduce your tax burden if done correctly.

Related Read: Maximizing Your After-Tax Returns

Tax Saving Scenario:

Hypothetical consider John who sold a significant amount of stock to fund a home renovation. He didn’t realize that the sale bumped them into a higher tax bracket, triggering the NIIT (Net Investment Income Tax). 

By the time he realized, it was too late to avoid the tax. A strategy that can be used is tax loss harvesting to minimize the impact in future years. 

The way tax loss harvesting would have worked in the scenarios is to locate the investments in the portfolio that have generated losses opposed to gains. Then, sell those investments at a loss to offset the gain to make the home renovations. 

It’s always a good idea to run these scenarios before making big financial moves.

---

3. Charitable Giving: Qualified Charitable Distributions (QCDs)

If you’re 70½ or older, you have the option of making a Qualified Charitable Distribution (QCD) directly from your IRA to a charity. A QCD can satisfy your RMD while reducing your taxable income. 

This is a powerful tool for those who don’t need the full amount of their RMD and would rather give back. QCDs don’t count as part of your taxable income, and they can be a way to support causes that matter to you while reducing your tax liability. 

Just make sure the distribution is reflected correctly on Form 1040, Line 4b, as excluded income.

Related Read: The Secret Strategies the High-Net-Worth Use to Maximize Wealth in Uncertain Times

Tip:

Make sure you communicate with your IRA custodian to ensure the QCD is processed correctly and sent directly to the charity. If you receive the money first and then donate it, it could count as a taxable distribution.

---

4. Medical Expenses and Itemized Deductions

Medical expenses can be a significant part of your budget as a retiree, and thankfully, some of those costs can be deducted from your taxes. If your total medical expenses exceed 7.5% of your Adjusted Gross Income (AGI), you can itemize them on Schedule A.

Don’t forget to include Medicare premiums, long-term care premiums, and out-of-pocket costs for doctors and prescriptions. For many high earners, especially those with large medical bills, itemizing could result in substantial tax savings.

The trick is determining whether itemizing your deductions is better than taking the standard deduction ($14,600 for singles or $29,200 for married couples in 2024). In some cases, “bunching” expenses into a single year can push you over the threshold to itemize.

Related Read: Inflation Strategies for Financial Resilience

Medical Expenses and Saving Taxes Scenario:

Consider Mary who had a sizable medical expense last year, and paid her long-term care premiums quarterly. By paying all the premiums upfront the following year, she is able to “bunch” those costs and allow them to be itemized instead of taking the standard deduction.

---

5. Filing Status: Married Filing Jointly vs. Separately

Your filing status plays a huge role in how much tax you’ll owe. If you’re married, you may be used to filing jointly, but it’s sometimes worth preparing your taxes both ways filing jointly, and filing separately to see which yields the better result. 

In certain cases, filing separately could lead to a lower tax bill, especially if one spouse has significant medical expenses or itemized deductions.

Additionally, if you were recently widowed or divorced, it’s important to update your filing status accordingly. The rules around taxes for widows can be tricky, so make sure you’re claiming the right benefits.

Related Read: How to Protect Your Wealth From Unforeseen Risks

Tip:

If you’ve had major life changes in the last year, such as a spouse passing away or getting divorced, it’s a good idea to work with a tax professional to understand how these changes affect your tax situation. Filing status adjustments can make a significant difference.

---

What’s Next and Final Thoughts: Don’t Go At It Alone

Navigating your taxes as a retiree can feel like walking through a minefield, but you don’t have to go at it alone. Whether you’re unsure about RMDs, managing capital gains, or maximizing deductions, getting professional advice can help you avoid costly mistakes.

Consider checking out our guide to major financial deadlines in 2025 to stay on top of your financial obligations. And don’t hesitate to reach out if you have questions or need a second opinion.

Related Read: FAQ for the Important Financial Dates: A High-Net-Worth Guide

Your tax return is more than just a form. It’s an opportunity to save, invest, and protect your wealth for the future. 

So take the time to review these issues carefully, and file with confidence! Have you filed your taxes yet?