Tax Aversion Therapies · for retirees
Diagnosis: Social Security, a pension, required distributions, and a brokerage account, all arriving in different envelopes with different rules.
Prognosis: retirement income is the most controllable income there is, if someone controls it.
There is no cure for required minimum distributions. These are the therapies.
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A retiree’s tax is set less by how much income arrives than by which income arrives and in what order. Social Security is taxed on a sliding scale that other income pushes. The new senior deduction phases out above a line. Medicare premiums are set by a line two years back. Capital gains are free below a line. Required distributions start at 73 and can be sent to charity instead of the 1040. Each of those lines is a place where a dollar of income costs more than its bracket, and each is also a place where moving a dollar saves more.
These ten therapies are the ones we use most for clients 65 and over. Several of them are decided in December; one of them (the beneficiary form) is decided once and matters most to the people who come after.
Dose: at 70½ or older, up to $111,000 a year per person (2026, indexed) transferred directly from an IRA to a charity is excluded from income, counts toward the RMD, and requires no itemizing.
A retiree who gives $8,000 a year and takes the standard deduction gets no deduction for it. The same $8,000 sent from the IRA is never income: it lowers AGI, which lowers the taxable share of Social Security, keeps the senior deduction, stays under the IRMAA tier, and reduces the Colorado $75,000 / $95,000 problem. It is the single most useful therapy on this page, and it has to be a direct transfer from the custodian to the charity, not a withdrawal followed by a check. Donor-advised funds don’t qualify. Full article: RMDs and Giving From Your IRA.
↑ Back to topDose: $6,000 per taxpayer 65 and over (on top of the age-65 standard deduction addition of $1,650 / $2,050), reduced by 6% of MAGI above $75,000 single / $150,000 joint; gone at $175,000 single, $250,000 joint with one qualifying spouse, $350,000 with two.
A couple at $160,000 of MAGI loses $600 of the deduction for every $10,000 over the line. A Roth conversion, a gain, or a large RMD in the phase-out range carries an extra effective rate of about 1.3 to 2.6 points. The deduction is scheduled through 2028; use the years it exists. Full article: The Senior Deduction and Its Phase-Out.
↑ Back to topDose: long-term gains and qualified dividends taxed at 0% while taxable income stays under $49,450 single / $98,900 joint. Sell, repurchase, reset the basis.
Retirees living on Social Security and a modest pension are the people this bracket was built for. The side effect: the gain raises AGI even at 0%, which can raise the taxable share of Social Security (so the real rate isn’t quite zero), and it counts for IRMAA and the Colorado cliff. The dose is computed on the whole return, not on the brokerage statement. Full article: Capital Gains Tax.
↑ Back to topDose: the default is taxable accounts first (gains at 0% to 15%), then traditional IRAs, then Roth last (it grows tax-free longest and passes to heirs tax-free). The exception, and it is common: in the years before RMDs, draw from or convert the traditional IRA to fill the low brackets, so the RMDs at 73 are smaller.
A retiree who spends down the taxable account entirely while the IRA compounds arrives at 73 with an RMD that pushes into the 24% bracket and IRMAA. One who takes $30,000 a year from the IRA at 12% from 65 to 72 arrives with a smaller IRA and a basis-stepped taxable account for the heirs. The Roth is the last account touched and the first one named for the grandchildren. Full article: Retirement Income.
↑ Back to topDose: the first RMD (the year you turn 73) can be delayed to April 1 of the next year, but then two come in one year; usually take it in the first year. Withholding on an IRA distribution is treated as paid evenly through the year, so a December RMD with 40% to 60% withheld covers the tax on the pension, the Social Security and the gains too, with no quarterly estimates and no penalty.
The December trick is the retiree’s W-4. Instead of four estimated payments, one distribution in December with heavy withholding, sized to the year’s total tax, satisfies the safe harbor as if it had been paid in April. Colorado withholding can be added on the same distribution. Missing an RMD costs 25% of the shortfall (10% if corrected within two years). Full article: Pensions, Social Security and IRAs.
↑ Back to topDose: a traditional IRA left to a child must be emptied within ten years, with annual RMDs in years one through nine if the owner had started RMDs; left to a spouse, it rolls over and is treated as the spouse’s own; left to a charity, it is never taxed; a Roth left to a child also empties in ten years but with no tax.
The planning: leave the traditional IRA to the charity and the Roth and the taxable account (with its step-up) to the children, if giving is in the plan at all. Name the children directly, not the estate (an estate beneficiary gets five years, not ten) and not a trust unless the attorney drafted it for this. Check the forms after a death, a divorce, or a move; the beneficiary form controls over the will. Full article: When a Loved One Dies.
↑ Back to topDose: take the RMD first (it can’t be converted), then convert additional amounts up to the top of the current bracket or the next IRMAA tier, in years when income is low or the market is down.
The window is smaller after 73 but not closed. A widow in the single brackets, a year with a large medical deduction, a down market that shrinks the account: each is a year when converting at 12% or 22% beats leaving the money for heirs who will take it at their rates within ten years. The conversion reduces future RMDs and leaves a tax-free account for the children. Full article: Roth IRAs.
↑ Back to topDose: medical expenses above 7.5% of AGI are deductible if you itemize: Medicare premiums (B, D, Advantage, Medigap), long-term care premiums within limits, assisted living when a plan of care certifies the need, nursing home costs, dental, hearing aids, home modifications, and mileage to appointments.
Most years the threshold swallows it. The year a spouse enters memory care at $90,000 is different: a couple with $120,000 of AGI deducts $81,000, and that is the year to pair a large Roth conversion or IRA withdrawal with the deduction, because the medical deduction offsets the income at ordinary rates. Prepaying January’s bills in December, and paying two years of a big dental plan in one, moves expenses into the year that clears 7.5%. Full article: Medical Expenses.
↑ Back to topDose: premiums for a qualified long-term care policy count as medical expenses up to an age-based limit (about $1,800 at 51–60, $4,800 at 61–70, $6,000 over 70 for 2026 (verify)) and can be paid tax-free from an HSA; benefits received are tax-free up to a daily cap or actual costs.
For a self-employed retiree with any business income, the premiums are deductible above the line under §162(l) within the same limits, no 7.5% floor. Hybrid life/LTC policies qualify for the LTC rider portion only if the policy separates it. Full article: Long-term care in the medical expenses page.
↑ Back to topDose: at 65, each spouse subtracts up to $24,000 of pension, annuity, IRA and taxable Social Security income, and all taxable Social Security above that if AGI is under $75,000 single / $95,000 joint; a couple with $60,000 of Social Security and modest other income pays no Colorado tax on any of it. Separately, the senior homestead exemption removes half of the first $200,000 of home value from property tax after ten years in the home, and the PTC rebate returns up to about $1,100 to low-income seniors.
The $75,000 / $95,000 AGI line is a Colorado cliff: one dollar over and the Social Security subtraction drops from unlimited to the $24,000 cap, which for a couple with $70,000 of Social Security can cost $1,500 to $2,000 of Colorado tax. QCDs, Roth conversions sized under the line, and gain harvesting sized under it all protect it. The homestead exemption requires an application with the county assessor by July 15; the PTC rebate is Form DR 0104PTC. Full article: Colorado for Retirees.
↑ Back to topIf you are 70½ or older, have the IRA custodian send the $6,000 directly to the church as a qualified charitable distribution. It is never income, it counts toward your RMD, and it lowers the income that decides how much of your Social Security is taxed and what your Medicare premium is. Same gift, several hundred dollars less tax.
No. Take the RMD in December and have 40% or so withheld, sized to cover the year’s total tax including the pension and Social Security. Withholding is treated as paid evenly through the year, so one December payment satisfies the safe harbor with no penalty.
If charity is in your plan at all, leave the traditional IRA to the charity (it pays no tax) and the Roth, the house and the brokerage account to the children (tax-free or stepped up). The children would owe ordinary income tax on the traditional IRA within ten years; the charity owes nothing.
Yes. At 65 and over, Colorado subtracts all your taxable Social Security only if AGI is $95,000 or less (joint); above that, the subtraction is capped at $24,000 per person. For a couple with substantial Social Security, crossing the line costs $1,500 or more. A QCD or a smaller IRA withdrawal can keep you under it.
For the Tax Shop desk · the thresholds and interactions that set the dose
Every December, bring the year-to-date numbers: Social Security, pension, what has come out of the IRA, the brokerage gains so far. We will set the RMD withholding, size any conversion or gain harvesting under the senior-deduction, IRMAA and Colorado lines, and route the year’s giving through the IRA. Once, not every year, bring the beneficiary forms and the account statements, and we will look at which account goes where. The first conversation saves money this year; the second saves it for the people who come after you.
Call 303-734-1040 or stop by the office in Lone Tree. We’ve been reading the footnotes for Douglas County and the Denver area since 1969.
Figures reflect the 2026 tax year as currently published and are rounded for readability. Items marked (verify) are to be confirmed against IRS or Colorado DOR sources before the figures freeze in December. Last updated October 15, 2026.
