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There are some important deductions to take advantage of when you become retired or a senior that will lower your income taxes each year. You may make tax-deductible retirement plan (i.e. IRA) contributions. If you sell your home to move into a smaller place or retirement community, you usually won't have to pay any taxes on the profit you make from the sale, as long as you live in the home for at least two of the five years before you sell it. Some medical expenses (which can be quite a large expense for older people) may be deductible. For example: insurance premiums, prescription drugs, long-term care premiums, and a lot of other miscellaneous health care expenses. As far as investment expenses, dividends and capital gains are taxed at just 15% and aren't usually subject to SS or Medicare taxes, and any investment advice or accounting services may be deductible to an extent. A senior may deduct business expenses, and a senior or retiree may deduct charitable contributions... but these are always subject to special limitations. Lastly, if you do not itemize your deductions, people 65 years and older by December 31st of the tax year are entitled to a higher standard deduction in general.