New Tax Deduction for Seniors: A Great Opportunity—If You Mind Your Income
By: Sheri Thomas
If you’ll be 65 or older in 2025, a recent tax law—the One Big Beautiful Bill (OBBB)—could lower your tax bill from 2025 through 2028. The law adds a Senior-Only Deduction that stacks on top of today’s standard deduction and the age-65+ add-on. It’s designed to help retirees keep more of their income and offset rising living costs. But keep in mind: the benefit shrinks as your income increases, so careful planning matters.
Social Security Remains Taxable
Despite recent rumors (and even a confusing email from Social Security), benefits are still taxed as they have been since the 1980s. The new deduction doesn’t change this—it simply helps reduce your taxable income.
How the New Deduction Works
If you’re 65 or older in 2025, here’s how the new Senior-Only Deduction under the OBBB combines with your existing deductions:
Single filers, age 65+:
- 2025 standard deduction: $15,750
- Age-65+ add-on: $1,800
- New OBBB add-on: $6,000
- Total possible deduction: $23,550
Married couples filing jointly, both age 65+:
- 2025 standard deduction: $31,500
- Age-65+ add-on: $3,600
- New OBBB add-on: $12,000
- Total possible deduction: $47,100
This new deduction stacks on top of your existing standard deduction and age-based add-on.
The deduction begins to phase out at:
- $75,000 MAGI (single) — gone entirely at $175,000
- $150,000 MAGI (joint) — gone entirely at $250,000
Important: You can claim this deduction whether you take the standard deduction or itemize, as long as you meet the age and income requirements.
Phase-Out at a Glance
The OBBB Senior Deduction (2025–2028) offers extra tax relief for seniors aged 65 and older but gradually phases out at higher income levels. Married couples filing jointly can claim up to a $12,000 deduction if their income (MAGI) is $150,000 or less, with the deduction decreasing as income rises and dropping to about $6,000 by $250,000. Single filers aged 65+ can claim up to a $6,000 deduction if their MAGI is $75,000 or less, but this amount phases out completely once income reaches around $175,000.
How Much Could You Save?
A married couple, both 65, with $90,000 of income:
| Without OBBB | With OBBB | ||
| Total deductions | $35,100 | $47,100 | |
| Taxable income | $54,900 | $42,900 | |
If they’re in the 12 % bracket, the extra deduction saves about $1,440 in federal tax.
Why Your Income Ceiling Matters
Crossing the phase-out line, even by a few dollars, chips away at the deduction: For example, a couple with an $150,000 MAGI gets the full $12,000 deduction. But if that same couple sells stock and adds $5,000 of gain from the sale resulting in the MAGI rising to $155,000 the deduction is cut by 6 % of the $5,000 excess which results in $300 lost and the deduction drops to $11,700. At higher incomes, the benefit disappears completely.
Everyday Moves That Raise MAGI
- Selling appreciated stock or mutual funds
- Large IRA or retirement-account withdrawals
- Selling a rental property or vacation home
- Cashing in savings bonds or annuities
- One-time pension or deferred-compensation payouts
Four Planning Tips
- Spread gains over several years instead of selling everything at once.
- Time IRA withdrawals for years when other income is lower.
- Coordinate real-estate or investment sales with your tax advisor.
- Track your MAGI mid-year so you can act before crossing a threshold.
Key Takeaways
- Up to $6,000 (single) or $12,000 (joint) extra deduction each year, 2025-2028.
- Phases out between $75k–$175k (single) and $150k–$250k (joint).
- Smart timing of sales and withdrawals helps keep the benefit intact.
Seniors and their families should review their tax situation for 2025 and beyond to ensure they claim this new deduction if eligible. The increased deduction could significantly reduce taxable income and lower overall tax liability for many retirees. A quick review now could save you hundreds—if not thousands—when you file. The OBBB’s Senior Only Deduction represents a meaningful step toward reducing the tax burden on older Americans, providing immediate and tangible relief for millions of retirees. Make sure you take advantage of it.
