Despite what you may have heard or read, Social Security retirement benefits are still subject to tax under the One Big Beautiful Bill Act (OBBBA). The complex rules for computing the tax on benefits remains in effect this year, next year and for the foreseeable future.
But the new legislation does include a new tax deduction for senior citizens that sweetens the tax pot when they file their personal returns. This new deduction takes effect in 2025 and is scheduled to end after 2028.
[This is part of a Special Series on the tax changes made by the One Big Beautiful Bill Act, which was enacted in July 2025. It includes a wide range of changes to individual and corporate taxes, deductions, credits, forms and other topics, that affect tax filing starting this year into the future.]
Basic premise: When you file a personal federal income tax return, you must decide whether to itemize deductions or claim the standard deduction. Absent any unusual circumstances, you should choose the method that provides the bigger tax benefit.
For decades, many middle-to-high income taxpayers came out ahead by claiming itemized deductions. However, the Tax Cuts and Jobs Act (TCJA) nearly doubled the standard deduction, with annual inflation indexing, while reducing the tax benefits of itemizing and providing other related changes for 2018 through 2025. As a result, millions of taxpayers switched to the standard deduction.
Now the OBBBA extends most of these changes for individuals to 2026 and makes them permanent. Accordingly, many taxpayers may expect to keep claiming the standard deduction over the next few years. For 2025, the standard duction was set at $15,000 for single filers and $30,000 for joint filers. The OBBBA bumps up these amounts for 2025 to $15,750 and $31,500, respectively.
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In addition, the tax law allows an extra standard deduction for individuals age 65 or older.
For 2025, the extra standard deduction is $2,000 for single filers over age 64 and $1,600 for each qualifying spouse that files a joint return. So, if both spouses are age 65 or older, they can claim a $3,200 deduction on top of the regular $31,500 deduction in 2025, for a total of $33,700.
Icing on the cake: Now the OBBBA adds yet another layer to the mix. If you are 65 or older, you can claim the new senior deduction, whether you itemize or not, and whether you are collecting Social Security or not. The deduction is $6,000 for each qualifying individual. In other words, if both you are your spouse are 65 or over, you can add another $12,000 deduction to the existing standard deductions for a grand total of $45,700. It could be even high for itemizers.
The extra $6,000 senor deduction is available for 2025 through 2028 (although it could subsequently by modified by Congress). But there is one major—
Caveat: The senior deduction is phased out based on your modified adjusted gross income (MAGI). The phase-out begins at $75,000 of MAGI for single filers and $150,000 for joint filers. Then the deduction is reduced by six cents for every dollar above the threshold. The phase-out is complete at $175,000 of MAGI for single filers and $250,000 for joint filers.
In summary: The OBBA changes can result in a tax windfall for senior citizens when they file their 2025 returns. Inform your clients of the latest changes and stress the importance of maximizing the tax breaks available in the upcoming tax season.
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