The 10 Most Overlooked Tax Deductions for High Net Worth Retirees
Most people think of tax deductions as a once-a-year scramble: gather receipts, hand them to a preparer, hope for the best. But if you're a high net worth household within 5–10 years of retirement, the deductions that matter most are built into your financial plan months or years in advance.
Below are 10 deductions and credits that are frequently missed, underused, or poorly timed by taxpayers who don't have a coordinated wealth management and tax strategy.
1. Qualified Charitable Distributions (QCDs) {#QCDs}
A Qualified Charitable Distribution is a direct transfer from your IRA to a qualifying charity that counts toward your Required Minimum Distribution without being counted as taxable income.
If you're 70½ or older and charitably inclined, a QCD lets you send up to $111,000 per person in 2026 (indexed annually) directly from your IRA to charity. Married couples with separate IRAs can combine for up to $222,000.
Many people assume the benefit is the same as a charitable deduction, but it's better. It reduces taxable income dollar-for-dollar, works even if you take the standard deduction, and can help keep Medicare IRMAA surcharges and Social Security taxation in check.
2. The HSA Triple Tax Advantage (and Catch-Up Contributions) {#HSA}
A Health Savings Account offers three tax benefits at once: deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.
2026 limits: $4,400 (self-only) / $8,750 (family), plus a $1,000 catch-up if you're 55+
If both spouses are 55+, each needs their own HSA to claim the catch-up
Many HNW households stop contributing once cash flow is comfortable, or treat the HSA as a pass-through spending account rather than letting it grow. Used correctly, it functions as a supplemental retirement medical fund with unused balances rolling over indefinitely.
3. The New OBBB "Senior Bonus Deduction" {#senior-bonus-deduction}
The Senior Bonus Deduction is a temporary $6,000 per-person deduction for taxpayers 65 and older, available for tax years 2025–2028, that stacks on top of the standard or itemized deduction. It's subject to income phase-outs but applies whether or not you itemize.
This can get overlooked because it’s new, stacks on top of the existing age-65 additional standard deduction, and households that assume "we make too much for extra deductions" often haven't run the actual phase-out math.
4. Long-Term Care Insurance Premiums {#LTC-insurance}
Premiums for a qualified long-term care insurance policy can be partially deductible as a medical expense, subject to age-based limits and the 7.5%-of-AGI threshold for itemized medical deductions.
LTC insurance is usually framed purely as risk protection, not a tax strategy. For business owners, premiums may also be deductible at the entity level depending on business structure. This nuance is easy to miss without coordinated planning.
5. Investment Interest Expense Deduction {#investment-interest}
If you borrow to invest (a margin loan or securities-backed line of credit), the interest may be deductible up to the amount of your net investment income.
This deduction requires itemizing and careful tracking of investment income, and unused interest can be carried forward. Households using leverage for liquidity (rather than selling appreciated assets) often don't realize the interest may offset other investment income.
6. Charitable Bunching and Donor-Advised Funds {#bunching}
"Bunching" means combining several years of planned charitable giving into a single high-income year, often through a donor-advised fund, to maximize the tax benefit of itemizing in that year.
Starting with 2026 returns, itemizers face a new floor of 0.5% of AGI before charitable deductions kick in. For a household with $600,000 in AGI, the first $3,000 of giving no longer counts.
The bunching workaround is rarely self-implemented, because it requires coordinating the gift with income timing, not just a giving budget.
7. SALT Cap Planning and the Pass-Through Entity Tax (PTET) Workaround {#salt-ptet}
PTET is an annual state-level election that lets a pass-through business deduct state income taxes at the entity level, sidestepping the federal individual SALT deduction cap.
The federal SALT cap rose to $40,000 for 2025–2029 but phases out between $500,000 and $600,000 of MAGI. Most states, including California, allow this PTET election for S-corps and partnerships.
This is an annual election with a filing deadline, not a set-it-and-forget-it strategy, This means if you miss the window, the benefit is lost for the year.
8. The Qualified Business Income (QBI) Deduction {#qbi}
QBI allows owners of pass-through businesses to deduct up to 20% of qualified business income, subject to income thresholds and limitations for specified service businesses. This can also apply to rental real estate held as a trade or business.
The rules around what qualifies and how W-2 wages and property basis factor into the calculation are complex. Many taxpayers near the income thresholds don't realize that restructuring compensation or timing income can preserve the deduction.
9. Medicare Premiums as a Medical Expense {#medicare}
Medicare Part B, Part D, and Medigap premiums count as deductible medical expenses for itemizers once total unreimbursed medical costs exceed 7.5% of AGI. Self-employed individuals may be able to deduct these premiums above the line entirely.
Retirees often stop thinking of Medicare premiums as a "medical expense" the way they thought of employer health premiums, especially when IRMAA surcharges are already pushing those premiums higher than expected.
10. Residential Energy Credits {#energy}
The Energy Efficient Home Improvement Credit and Residential Clean Energy Credit reduce your tax bill dollar-for-dollar for qualifying home upgrades, unlike a deduction which only reduces taxable income. Eligibility covers solar, certain HVAC systems, and insulation, though rules have been narrowing under recent legislation.
Being a credit rather than a deduction often makes this more valuable than people assume, especially for a household planning a renovation before downsizing into retirement.
California vs. Idaho: What's Different {#ca-vs-id}
California: California does not conform to several federal provisions, including HSA tax treatment. It taxes HSA contributions and growth at the state level, unlike federal treatment. Residents should also watch state-specific charitable and mortgage interest rules, which don't always mirror federal limits.
Idaho: Idaho offers a more favorable state tax environment for retirees, with no state tax on Social Security benefits and a flatter, lower income tax rate, which changes the math on Roth conversion timing and where QCDs versus taxable withdrawals make the most sense.
Households splitting time or migrating between the two states should note that residency rules and the timing of income recognition around a move can meaningfully change which strategies above apply and when.
None of these deductions exist in isolation. A household using QCDs, bunching charitable gifts, electing PTET at the business level, and timing a Roth conversion all in the same plan year needs those pieces coordinated, not handled by separate advisors working from separate information.
As always, we recommend working with a professional who understands both tax strategies and wealth management.
Curious which of these apply to your situation? Schedule a consultation with us.
And if you want to learn more about ways to reduce your tax bill, request a free copy of our book on the 50 Legal Ways to Reduce Your Lifetime Tax Bill: https://50-tax-strategies.scoreapp.com/
Q&As in this blog:
What are the most overlooked tax deductions for retirees?
What is a Qualified Charitable Distribution and how much can I give in 2026?
Does the HSA triple tax advantage still work near retirement?
What is the OBBBA Senior Bonus Deduction?
Can I deduct long-term care insurance premiums?
Is investment interest expense deductible?
How does the 0.5% AGI floor affect charitable deductions in 2026?
What is the Pass-Through Entity Tax (PTET) SALT workaround?
What is the Qualified Business Income (QBI) deduction?
Are Medicare premiums tax deductible?
What's different about tax planning in California vs. Idaho for retirees?
Should I take the standard deduction or itemize in 2026?
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