Tax preparation in retirement looks different than during your working years. With income potentially coming from multiple sources — Social Security, pensions, IRA distributions, investment gains — staying organized and planning ahead can save you both stress and money.
Here are practical tips to help you prepare for the upcoming tax season.
Gather Your Documents Early
Start collecting these key documents as they arrive in January and February:
- Form SSA-1099: Social Security benefit statement
- Form 1099-R: Distributions from retirement accounts (IRA, 401(k), pensions)
- Form 1099-INT / 1099-DIV: Interest and dividend income
- Form 1099-B: Capital gains from investment sales
- Form 1095-B/C: Health insurance coverage (including Medicare)
- Property tax statements: For itemized deductions
- Charitable donation receipts: Including QCD documentation
Create a folder — physical or digital — and add documents as they arrive. Having everything in one place saves significant time when you sit down with your tax preparer.
Review Your Withholding
One of the most common tax surprises in retirement comes from inadequate withholding. Unlike a paycheck where taxes are automatically withheld, many retirement income sources require you to proactively set up withholding:
- Social Security: You can request withholding at 7%, 10%, 12%, or 22%
- Pension payments: Adjust withholding on your W-4P
- IRA distributions: Specify withholding on each distribution
- Estimated quarterly payments: Required if you don’t have sufficient withholding
If you owed a significant amount last April or received a large refund, it’s worth adjusting your withholding to get closer to breakeven.
Maximize Deductions and Credits
Standard vs. Itemized Deduction
For 2026, the standard deduction for those 65 and older is significantly higher than for younger taxpayers. Many retirees find the standard deduction more beneficial, but it’s worth running the numbers if you have significant:
- Medical expenses (exceeding 7.5% of AGI)
- State and local taxes (up to $10,000)
- Charitable contributions
- Mortgage interest
Qualified Charitable Distributions (QCDs)
If you’re 70½ or older, you can donate up to $105,000 directly from your IRA to a qualifying charity. The distribution counts toward your Required Minimum Distribution but is not included in your taxable income. This is one of the most tax-efficient charitable giving strategies available.
Plan Ahead for Next Year
Tax planning is most effective when it’s proactive, not reactive. Consider these strategies now:
- Roth conversion opportunities: If your income is lower this year, it may be an ideal time to convert some traditional IRA assets to Roth
- Capital gains harvesting: In years with lower income, you may fall into the 0% capital gains bracket
- Bunch charitable deductions: Alternate between itemizing and taking the standard deduction in different years to maximize the tax benefit of your giving
Work with Your Team
The most effective approach combines your CPA’s tax preparation expertise with your financial advisor’s forward-looking tax strategy. At Financial Advisors AZ, tax mitigation is a year-round discipline — not just an April exercise.
Contact us to discuss how proactive tax planning can benefit your retirement.
