A cliche says the only things you can count on in life are death and taxes. But there is one other certainty: change.
When you retire, the federal income tax burden you face is likely to change substantially. That may or may not be true of state income taxes, depending on where you live.
So, keeping in mind that federal taxes are largely the same from coast to coast, here are some key ways in which federal income taxes change during retirement, for both better and worse.
1. You might owe taxes on your retirement income
During your working years, you may have enjoyed deferring taxes for decades by tucking many thousands of dollars into a tax-advantaged retirement account such as a traditional 401(k) plan or a traditional IRA.
However, depending on your age and income, you will likely finally have to pay the tax piper once you withdraw that money during retirement. The main exception to that reality would be if you put money into Roth retirement accounts instead of traditional accounts.
The potential for taxes on retirement income does not end there. About 40% of people who receive Social Security benefits owe federal taxes on them, according to the Social Security Administration.
Income you get from pensions and annuities also might be subject to federal income taxes.
2. Your standard deduction goes up
We have just seen that the government eventually reaches into your pocket to claim taxes on retirement income. Fortunately, it also uses the other hand to give back some of that cash in the form of a higher standard deduction.
Those who are 65 or older generally enjoy a higher standard deduction every year.
For the 2025 tax year, the one for which returns are due by April 2026, this boost translates to an additional $1,600 per married person or $2,000 per single person. For the 2026 tax year, for which returns are due by April 2027, the boost rises to $1,650 or $2,050 to account for inflation.
In addition, a new deduction of up to $6,000 for those who are 65 or older is available for 2025 through 2028. This senior deduction was created by the federal One Big Beautiful Bill Act of 2025.
The best news about the new, temporary senior deduction is that it does not replace the increased standard deduction that is always available to seniors. It is added to it. Together, the two tax breaks amount to well over $20,000 for a single senior and well over $40,000 for a married senior couple.
3. Deductions for retirement contributions stop
For the most part, once you retire, you will no longer save money in retirement accounts. That means you will no longer enjoy any tax deductions for contributing to retirement accounts.
Some older folks might still be eligible for these deductions, however.
For example, if you work a part-time job during retirement, you may be allowed to make contributions to a traditional retirement account and get a deduction in return. In addition, a retiree whose spouse is still working could continue to save in a traditional IRA and earn a deduction.
4. RMDs can increase your taxes
If you have savings in a traditional retirement account, you may be able to delay withdrawing money from the account — and thus avoid paying income taxes on the withdrawals — for quite a while during your retirement.
But once you turn 73, the government will force you to begin making withdrawals, which are known as required minimum distributions (RMDs). And for most retirees, that will mean paying more in taxes. That’s because RMDs are generally considered taxable income.
With the right planning, there may be ways to get around paying taxes on some or all of your RMDs. The earlier you plan, the better your chances of lowering your tax bill. Consulting with a financial advisor or tax professional can be a good way to map out a strategy that helps you keep more money in your pocket.
5. Your Medicare premiums might be deductible
After exiting the daily grind, some retirees discover a burning desire to start their own business or to explore gig work. These are folks who long dreamed of being self-employed, and now have the chance to explore that ambition.
If you pursue self-employment during your golden years, one of the unexpected perks might be the ability to deduct Medicare premium costs on your tax return.
For more on how this works, check out “The Most Overlooked Benefit of Gig Work in Retirement.”
6. Deductions for HSA contributions stop
Most retirees are eligible for Medicare beginning at the age of 65. Once you enroll in the health insurance program, you are prohibited from saving money in a health savings account (HSA). This means the tax deductions you likely had been getting for your HSA contributions will disappear.
The good news is you can continue to tap existing funds in an HSA for medical expenses throughout retirement.
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