The 5 Most Common Tax Mistakes Seniors Make (and How to Avoid Them) in 2025

Mistake #1: Mishandling Required Minimum Distributions (RMDs)

This is arguably the most costly mistake a retiree can make. RMDs are mandatory annual withdrawals from your traditional retirement accounts starting at age 73.

• The Mistake: Forgetting to take the RMD, taking the wrong amount, or taking it after the December 31st deadline.
• The Cost: The penalty for a missed RMD is steep. While the SECURE 2.0 Act reduced it from 50%, it’s still a painful 25% of the amount you failed to withdraw (or 10% if you correct the error in a timely manner).
• How to Avoid It: Set a calendar reminder for early in the fourth quarter. Ask your IRA custodian to help you calculate the correct amount. If you are charitably inclined and over 70½, use a Qualified Charitable Distribution (QCD) to satisfy your RMD tax-free.

Mistake #2: Underestimating Taxes on Social Security Benefits

Many seniors are surprised to learn that up to 85% of their Social Security benefits can be taxable, depending on their other income.

• The Mistake: Assuming Social Security is tax-free and not accounting for it when taking distributions from other sources like an IRA or pension.
• The Cost: A surprise tax bill at the end of the year, potentially with underpayment penalties and interest.
• How to Avoid It: Understand the “provisional income” formula. Before taking a large withdrawal from a traditional IRA, consider how that extra income will impact the taxability of your Social Security. To avoid a big bill, you can ask for voluntary tax withholding from your benefits using IRS Form W-4V.

Mistake #3: Choosing the Wrong Filing Status After a Spouse Passes Away

The rules for filing status after the death of a spouse are generous but often misunderstood, leading to costly errors.

• The Mistake: A widow or widower filing as “Single” in the year their spouse passed away.
• The Cost: Filing as Single results in a much smaller standard deduction and less favorable tax brackets compared to “Married Filing Jointly.”
• How to Avoid It: In the year your spouse dies, you can still file your return using the Married Filing Jointly status. For the next two years after that, if you have a dependent child, you may be able to use the advantageous Qualifying Surviving Spouse status.

Mistake #4: Forgetting to Claim the Higher Standard Deduction

This is a simple error that leaves money on the table. The IRS gives a larger standard deduction to taxpayers age 65 and older.

• The Mistake: A DIY filer accidentally using the standard deduction amount for someone under 65.
• The Cost: Overpaying taxes by failing to claim the full deduction to which you are entitled.
• How to Avoid It: Use a quality tax software program, which will automatically apply the higher deduction based on your date of birth. Alternatively, use the senior-friendly Form 1040-SR, which features a clear chart with the correct amounts on the front page.

Mistake #5: Not Tracking Medical Expenses and Missing a Big Deduction

Seniors often have significant healthcare costs, which can lead to a substantial tax deduction, but only if they keep records.

• The Mistake: Automatically taking the standard deduction without checking if high medical expenses would make itemizing more beneficial.
• The Cost: Missing out on a deduction that could potentially save you thousands of dollars, especially in a year with a major health event.
• How to Avoid It: Keep a dedicated folder for all medical receipts, including premiums for Medicare, co-pays, prescriptions, and dental work. At the end of the year, add them up. If the amount is significant, do a quick check to see if it exceeds 7.5% of your AGI and if your total itemized deductions would be greater than your standard deduction.