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The financial world is always in motion, with new legislation and changing tax codes. For those nearing or in retirement, these shifts can feel like a moving target, adding unnecessary financial stress to a time that should be focused on enjoying life. This is where a proactive, informed approach becomes invaluable.
The recently enacted One Big Beautiful Bill Act (OBBBA) is a prime example of a legislative change that can significantly impact your financial life, particularly your 2025 tax return and beyond. While the law is wide-ranging, a key provision directly benefits seniors with a new tax deduction.
The Senior Deduction: What’s Changing for You?
The OBBBA introduces a new $6,000 tax deduction per individual, specifically for seniors. This is a temporary benefit, available for tax years 2025 through 2028, and it’s a crucial change to be aware of. Here are the key details:
- Who Qualifies? To claim the deduction, you must be 65 years or older by the end of the tax year. You also need to have a valid Social Security Number.
- Married Couples: This is a “per taxpayer” benefit, which means married couples filing a joint return can claim up to $12,000 if both spouses are 65 or older and meet the other requirements.
- The Phase-Out: The deduction is subject to a phase-out based on your Modified Adjusted Gross Income (MAGI). For single filers, the deduction begins to phase out when MAGI exceeds $75,000 and is completely eliminated at $175,000. For married couples filing jointly (where both are 65+), the phase-out starts at a MAGI of $150,000 and is fully eliminated at $350,000. The deduction is reduced by 6% of the MAGI that exceeds these thresholds.
- In Addition to Other Deductions: This new benefit is a deduction in addition to your regular standard deduction and any existing age-related benefits you may already be claiming. It doesn’t replace them.
- Important Note on Social Security: It’s worth remembering that Social Security benefits are still subject to federal income tax. Earlier discussions about excluding this income from taxation did not become law.
What’s Next?
The One Big Beautiful Bill Act (OBBBA) is a prime example of a legislative change that can significantly impact your financial life, particularly your 2025 tax return and beyond. By understanding how new laws affect your personal situation and by taking a proactive, informed approach, you can help minimize your financial stress.
As an independent, fee-only registered investment advisor with a fiduciary responsibility to act in your best interest, we are committed to helping you navigate this complexity. We believe that by investing prudently through market cycles and by coaching you to control your emotions, we may provide a smoother path on this journey called life.
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