5 Ways the New Tax Laws Affect Retirees and Active Adults

Learn about the new tax laws going into effect this year and how it will affect your retirement.
Learn about the new tax laws going into affect this year and how it will effect your retirement.
Learn about the new tax laws going into effect this year and how it will affect your retirement.

Last month, President Trump signed into law a tax overhaul bill that divided many in Congress and around the nation. Supporters claimed that the new laws would ease financial burdens for the middle class while detractors claimed its intention was to help corporations and put the long-term burden on individuals. 

Now that the dust has begun to settle, 55places.com dug into the laws and reactions in order to find out how it will affect retirees and active adults.

Taxes

The good news is that, unless you’re in the small tax bracket of people who make between $191,650 and $416,700, your tax rate should go down in 2018. As always, it’s important for retirees to keep a close eye on any income to avoid slipping into a higher bracket and owing more taxes (that includes withdrawals from retirement accounts and required minimum distributions as well as any job income).

If you have a large retirement account balance, you may want to begin distributions by the time you turn 70-and-a-half, when you’re actually required to take distributions from some of those accounts. That way, it cuts down on a potential tax bracket jump. Another good reason to plan ahead now is that these provisions that bring the tax rates down are set to expire by the end of 2025. It’s likely that if all else remains the same, your taxes will rise then and you’ll want to be in an income bracket that you can afford.

Charity Considerations

The new tax bill tries to simplify the process by cutting down on deductions. Chances are, retirees won’t have too many to deal with anyway, other than property taxes, state taxes, and charitable contributions. Per Marketwatch, that third one could really come in handy for active adults.

By using Qualified Charitable Distributions, retirees would be allowed to donate directly to charities from their IRAs without having to itemize them after passing 70-and-a-half in age. By donating larger amounts less frequently, it would give you more to write off than if you were following standard deduction limits.

To Buy or Rent

There is a lot of concern that the new tax system will discourage active adults from buying and instead push them toward renting. Some experts believe that the savings from homeownership will be drastically undercut, by as much as $10,000 per year.

However, if this affects homebuyers, it also affects homebuilders. When in doubt, expect to see builders figure out ways to make homeownership work even in the face of lost affordability. That could mean changes in amenities, cost, or availability, but there’s no doubt that they will adjust to the market just as consumers must.

Good States & Bad States

The tax plan’s $10,000 cap on deductions for state and local income as well as state and property taxes could have a huge effect on where active adults decide to retire. As Kiplinger notes, high-tax states such as Minnesota, Connecticut, and Kansas are likely in trouble as retirees will eliminate them from their destinations. States with higher home prices, such as California, New York, and New Jersey, will also feel the impact.

Along with the sunshine, there’s another good reason so many people retire in Florida, Nevada, and Texas. That trio of states is among seven that have no individual income tax. Those looking to avoid sales tax instead should consider Alaska, Delaware, Montana, New Hampshire, or Oregon.

The tax plan doubles the estate tax exemption from $5.49 million to $11 million per person. Still, that’s worth keeping in mind if you plan to live in a state with an estate or inheritance tax (Illinois, Maryland, New Jersey, New York, Pennsylvania, to name a few). Want to steer clear of property taxes altogether? Consider retiring in Hawaii, Alabama, Louisiana, or Wyoming.

Medical Costs

Perhaps the most important impact this tax plan could have on retirees is the way it affects medical coverage. Health care was a major focus on the tax bill and by repealing the Affordable Care Act’s individual mandate, which taxes those who choose not to have health insurance, it could effectively end the program.

What will happen remains to be seen, but it’s argued that it could result in a loss of affordable coverage and higher premiums for millions of Americans. That said, those dealing with high medical expenses were gifted with the ability to deduct expenses that exceed 7.5 percent of their adjusted gross income for 2017 and 2018 (though that threshold will go back to ten percent in 2019).

As for Medicare and Medicaid, the tax bill itself doesn’t involve them but further cuts are expected across both, adding up to the trillions. What it all means is that if medical expense concerns are important to you, as they are to most active adults, investing in more expensive medical coverage or socking away more savings will be important considerations.

Can you spot the $207,744 difference between these identical homes?

Financing is the difference!

Get the details in The 62+ Loan Homebuyers Guide.

55places Mortgage is a joint venture between Mutual of Omaha Mortgage and 55places.com.
Details here.

Share this post:

We're here to help! (800) 928-2055

Call us to speak with a customer service representative.

Subscribe to Our Newsletter

Get Weekly Updates

I agree that 55places and its affiliates, partner providers or agents may call, text, or email me about my inquiry, which may be made with automated means. I understand that my consent is not a prerequisite for buying a property. I may revoke my consent at any time by contacting [email protected] Message/data rates may apply. I also agree to 55places.com’s Privacy Policy and Terms of Use.

The Best Places to Snowbird in 2021

We’ve gathered 25 of the best places for snowbirds, including cities in Florida, Arizona, California, Texas, South Carolina, and Nevada. For each entry, we’ve also provided a list of recommended 55+ communities in the area. If you’re ready to find your own winter retreat this season, here are some of the best places to consider.

Interior view of the indoor pool at Del Webb Ponte Vedra in Ponte Vedra, Florida.

Jacksonville Area 55+ Communities With Indoor Pools

There’s something so luxurious about an indoor pool. Take a look at these communities in Jacksonville and the surrounding northeast Florida area. You’ll find indoor pools and much, much more.

Sunset on sandy and rocky beach in the Bay Area of California.

55+ Communities on the Beach in the Bay Area

Perhaps you’re ready to turn your dream of living by the beach into reality. In that case, we’ve got you covered, because there are a few wonderful beachside 55+ communities right in the Bay Area.

A 55+ couple with arthritis holding hands and enjoying a day at the beach.

The Best Places to Retire With Arthritis

Those with arthritis know the pain and discomfort can be difficult to manage day-to-day. While there are many remedies to manage the pain, one you may not consider is climate. 55Places has taken a look at the best regions to live if you have arthritis, and many of them are home to 55+ communities!

A bridge over a pond on the grounds of Sun City Lincoln Hills in Lincoln, California.

Large 55+ Communities in the Sacramento Area

One of the greatest benefits of living in a large community is the vast amount of amenities typically offered. If you’re looking for larger 55+ communities in Sacramento, you’ll want to check out the three following communities.

Aerial view of the Downtown Spartanburg skyline in South Carolina on a sunny day.

Living in Spartanburg, South Carolina

Located in the scenic foothills of the Blue Ridge Mountains in Northwestern South Carolina—also known as the Upstate—Spartanburg is an ideal destination for active adults who want to retire in a mid-sized city with a small-town, close-knit feel.

About 55places

We’re changing the way people 55 and older are searching for their perfect next place. With a national network of hand-selected real estate experts, plus comprehensive information, unbiased content, and on-the-go insight about thousands of communities across the country, we’re a trusted resource paving the way from here to home. Whether you’re interested in a low-maintenance single-level residence, an active lifestyle or age-qualified community, an intimate enclave, or anything in between, we can help you make your next move the best one yet.

Scroll to Top