As the tax season approaches, recent changes from the IRS promise to benefit older Americans significantly, especially concerning retirement savings. Notably, the revisions stem from the enactment of the Republicans’ One Big Beautiful Bill Act (OBBBA), which introduced several impactful tax policies.
Among these changes is a bonus deduction for seniors aged 65 and older, effective from the 2025 tax filing year, which begins on January 26. This new provision allows qualified seniors to claim an additional deduction on top of the standard deduction—up to $6,000 for individuals and $12,000 for married couples. Nancy LeaMond, AARP’s executive vice president and chief advocacy and engagement officer, highlighted the importance of this deduction for lower- and middle-income retirees, indicating it could help tens of millions of seniors retain more of their income amidst rising cost-of-living pressures.
The extra deduction’s availability is contingent on income levels, phasing out for taxpayers with a modified adjusted gross income (MAGI) exceeding $75,000 for single filers and $150,000 for joint filers. For example, a single 70-year-old with a MAGI of $80,000, which exceeds the $75,000 threshold, would see their deduction reduced by $300, resulting in a total allowed deduction of $5,700. Additionally, the deduction phases out entirely once MAGI reaches $175,000 for individuals and $250,000 for joint filers.
This provision is not permanent; it is scheduled to expire after the 2028 tax year. The temporary nature of the bonus deduction was designed to comply with Congress’ reconciliation rules, which limit the potential increase in budget deficits as a result of new legislation. Even though the legislation is currently under law, Congress may revisit the policy’s expiration, but there are no clear indications on whether lawmakers will pursue an extension.
Importantly, seniors can claim this new deduction regardless of whether they choose to itemize their tax return or stick with the standard deduction, providing greater flexibility during tax filing. As older adults navigate their financial constraints, this change may offer vital relief during these challenging economic times.
