Use This Senior Tax Break Before It Disappears

There is a tax break right now that many retirees do not know about.

If you are 65 or older, you get an extra deduction on top of your standard one.

It is worth up to $6,000 per person. 

For a married couple where both are 65 or older, that is up to $12,000.

But here is the catch. 

This bonus deduction is temporary. It is set to expire at the end of 2028.

So the window to use it is short.

Here is one smart way to put it to work.

A Roth conversion.

That is when you move money from your IRA into a Roth account. 

You pay tax on the amount you move now. 

In return, that money grows tax free for the rest of your life.

Normally a conversion adds to your taxable income.

But this extra deduction can help cover part of that income.

In plain terms, it lets you move some money into a Roth at a lower tax cost than usual.

But there is one thing to watch.

This deduction shrinks as your income goes up. 

Convert too much in one year and you can lose the very break you are trying to use.

So the goal is to convert the right amount. 

Enough to make good use of the deduction, but not so much that it fades away.

That is a fine line, and it is different for every household.

The break is here now. In a few years it will be gone.

That makes the next few years a rare chance to move money into a Roth while the cost is low.

Converting an employer plan account or Traditional IRA to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may have several consequences including but not limited to, a need for additional tax withholding or estimated tax payments, the loss of certain tax deductions and credits, and higher taxes on Social Security benefits and higher Medicare premiums. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA.