A Retiree’s Guide to Reviewing a Tax Return

As you review your 2025 tax return in 2026, resist the urge to focus only on whether you owed money or received a refund. For retirees, a tax return does more than settle last year’s bill. It shows how distributions, deductions, investment income, and tax thresholds are interacting.

Retirement income is layered. That makes a careful review more important, not less.

Here is where to focus.

Start With Filing Status and Standard Deductions

Begin at the top of Form 1040 and confirm your filing status reflects your current circumstances. If you were recently divorced or your spouse passed away, that designation matters.

If you are married, it may be worth comparing Married Filing Jointly and Married Filing Separately in certain situations, particularly where there are liability concerns, large income differences, or significant itemized deductions. In some cases, filing separately may result in a lower overall tax liability.

Next, review whether you took the standard deduction of $15,750 if single or $31,500 if married filing jointly. If so, consider whether bunching charitable contributions, medical expenses, or property taxes into one year could allow for better itemization.

If you or your spouse is age 65 or older, or blind, you may qualify for a higher standard deduction. The additional deduction is $1,600 for each married taxpayer and $2,000 for unmarried taxpayers.

If you filed jointly and are age 65 or older, review Schedule 1-A, Line 37, to ensure you are claiming the enhanced deduction for seniors. Eligibility begins to phase out at $75,000 of modified adjusted gross income for single filers and $150,000 for married filing jointly.

If alimony is involved, the agreement date matters. Agreements entered into after December 31, 2018, do not allow alimony to be deductible by the payor or taxable to the recipient. Agreements before January 1, 2019, follow the prior rules.

Watch for AMT and Unexpected Results

If the Alternative Minimum Tax was reported on Form 6251, review whether strategies such as minimizing large capital gains or harvesting losses may help reduce exposure in the future.

If you paid a significant amount of AMT in 2024, check Form 8801 to determine whether a credit was available.

Also, review whether you owed more tax than expected or received a larger refund than anticipated. Compare taxable income from the last two years’ tax returns to determine whether a unique circumstance, such as the sale of a highly appreciated investment, drove the result.

If you failed to withhold enough tax or underpaid estimated taxes and incurred a penalty, review Form 2210 and Form 1040, Line 38. That may signal the need to adjust withholding from retirement accounts or estimated payments in 2026.

Understand Investment Income and Thresholds

For many retirees, investment income is a primary source of cash flow.

If interest is reported on Form 1040, Lines 2a and 2b, or dividends are reported on Lines 3a and 3b, reference Schedule B to identify which accounts generated income and whether the income was taxable or tax-exempt. Confirm whether dividends were ordinary or qualified.

If modified adjusted gross income exceeds $200,000 for single filers or $250,000 for married filing jointly, and you have significant net investment income, you may be subject to the 3.8 percent Net Investment Income Tax.

If capital gains or losses were reported on Form 1040, Line 7a, review Schedule D. Confirm capital gain distributions and ensure short-term and long-term loss carryovers from prior years were properly applied.

Medical, Property, and State Considerations

If you had significant medical expenses, review Schedule A, Line 1, to determine your deduction limit. When calculating medical expenses, remember to include Medicare premiums and long-term care premiums.

State taxation also deserves attention. Many states offer tax benefits to retirees, such as not taxing Social Security or pensions. Confirm that any state-specific considerations were properly addressed.

If you own rental real estate, review Schedule E to confirm which expenses were deducted.

If you paid interest on a qualified new vehicle assembled in the United States and the loan originated after December 31, 2024, review Schedule 1-A, Line 30 to ensure the qualified passenger vehicle loan interest deduction was claimed. Eligibility begins to phase out at $100,000 of modified adjusted gross income for single filers and $200,000 for married filing jointly.

If you took a non-qualified distribution from a 529 account, confirm that Form 5329 calculated the penalty and that it carried over to Schedule 2, Line 8.

Retirement Account and Distribution Review

If you reached your Required Beginning Date in 2025 or earlier, or if you inherited an IRA, confirm required minimum distributions were satisfied and properly reported on Form 1040, Lines 4a and 4b or 5a and 5b.

If you are at least age 70½ and completed a Qualified Charitable Distribution, confirm it was properly reflected and excluded from income on Form 1040, Line 4b.

If you have made non-deductible IRA contributions, ensure Form 8606 tracks the cost basis accurately.

If you withdrew funds from an IRA that includes after-tax contributions, review Form 8606 to confirm the taxable and non-taxable portions were calculated correctly.

If you converted amounts from a traditional IRA to a Roth IRA, confirm the conversion was reported properly and that non-deductible contributions were treated as non-taxable.

If you rolled over retirement funds from one account to another, verify that Form 1040, Line 4a or 5a reflects the rollover amount and that Line 4b or 5b shows zero if no taxable distribution occurred.

If you utilized Net Unrealized Appreciation when rolling over employer stock, review Form 1040, Lines 5a and 5b to confirm the basis was taxed appropriately.

A Final Thought

Your 2025 return is finished. That makes 2026 the right time to evaluate how your retirement income plan is functioning.

A thoughtful review now can help prevent penalties, confirm deductions were captured, and ensure distributions were handled correctly. More importantly, it allows you to make adjustments before the next filing season arrives.

Retirement may simplify your schedule. Your review process should remain deliberate.

WHWM is here to guide you in identifying your priorities, developing a plan, and making adjustments along the way. By choosing WHWM, you're partnering with our Founder and President, Stephen Bodwell. As a CPA and CFP® professional, Stephen is committed to helping you achieve your financial goals and aspirations. Don't hesitate to take the next step toward realizing your dreams. Schedule your complimentary, no-obligation 30-minute consultation with Stephen. 

Walnut Hill Wealth Management, LLC (“WHWM”) is a registered investment advisor offering advisory services in the State of Texas and in other jurisdictions where exempt. The information provided is as of the date indicated and is subject to change.