A Fresh Tax Break for Seniors Starting in 2025

A Fresh Tax Break for Seniors Starting in 2025

By Michael Norman, Owner & Broker, The CBA Group

A new piece of federal legislation, the One Big Beautiful Bill Act (OBBBA), has introduced an important opportunity for older taxpayers. If you or someone you know is 65 or older, there’s a valuable deduction that will soon become available, and it could offer meaningful tax savings over the next few years. Below is a clear breakdown of what’s changing and how you might benefit.

What’s New in the Law

Personal exemptions have been phased out for good

Previously, there was some back-and-forth about whether personal exemptions would return in 2026. That question has now been answered. The OBBBA makes their elimination permanent, simplifying some aspects of tax planning moving forward.

A $6,000 deduction for eligible seniors

Starting with the 2025 tax year, seniors who meet certain criteria will be eligible for a new deduction of up to $6,000 per person. Here’s how it works:

• You must be 65 or older during the tax year.
• The deduction applies only for the years 2025 through 2028.
• It’s available per person, but married couples must file jointly to both claim it.
• A valid Social Security number is required.
• The deduction begins to phase out based on income. Full eligibility is based on your modified adjusted gross income (MAGI):
• Income thresholds:
  • Single: Full benefit up to $75,000
  • Married Filing Jointly: Full benefit up to $150,000
• The deduction is reduced by 6% of any income over these limits.
• Phaseout ranges:
  • Single: From $75,000 to $175,000
  • Married Filing Jointly: From $150,000 to $350,000

Example

Jack and Diane, both 70 years old, are retired and file a joint tax return. Their modified adjusted gross income in 2025 is projected to be $180,000.

• Income over the $150,000 threshold: $30,000
• Phaseout amount: 6% of $30,000 = $1,800
• Full deduction: $6,000 each = $12,000
• Final deduction after phaseout: $12,000 – $1,800 = $10,200

How You Can Prepare

Inform your network

Many seniors won’t be aware of this change, especially if they don’t closely follow tax law updates. Let family members, friends, or clients know they may be eligible for this deduction.

Plan around the phaseout

If you’re still working part-time or consulting in retirement, consider how your earnings may affect your MAGI. Staying under the income threshold could allow you to keep the full deduction.

• Want to know what counts toward MAGI? The IRS explains it here:
  IRS MAGI Definition
• Review your withholding strategy. Adjusting now could help reduce any tax burden come filing time.

Social Security remains taxable

Despite talk of possible changes, Social Security benefits are still taxed at the federal level. This new deduction does not change that.

This is on top of other deductions

The $6,000 deduction for seniors is in addition to your standard deduction and any age-based increases that are already part of the tax code. It’s an extra benefit, not a replacement for anything you already receive.

These new rules offer a great opportunity to revisit your financial planning. If you’re not sure how this might affect you or someone you know, feel free to reach out to Michael Norman at The CBA Group. We’re happy to walk you through the details and help you get the most out of what’s available.

Article from CK Books & Billing. This article has been reprinted with permission from
CK Books & Billing