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Retirees have long expressed their frustration that a portion of the Social Security benefits they’ve spent a lifetime earning could be subject to federal income taxes. And for years, those concerns have sparked debate across the political spectrum.
During his 2024 campaign, President Trump proposed exempting Social Security from federal income tax. And in recent months, lawmakers in Congress (both Republicans and Democrats) introduced legislation with that same goal in mind.
So far, however, the tax on benefits — which is based on a person’s filing status and income — remains in place.
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But thanks to the One Big Beautiful Bill Act (OBBBA), which passed in July, many older Americans can still count on a hefty tax break, at least for the next four years.
The new law temporarily provides a “bonus” deduction of up to $6,000 each year, from 2025 through 2028, for taxpayers 65 and older. (That’s $12,000 for married-filing-jointly couples if both spouses are 65-plus.) This is on top of the annual additional standard deduction that these older taxpayers are already allowed.
But unlike the existing additional standard deduction, you can take the new bonus deduction even if you choose to itemize on your tax return.
There are income limits: The value of the bonus deduction begins to phase out at a modified adjusted gross income (MAGI) of $75,000 for single filers and $150,000 for those who are married and filing jointly.
And it phases out entirely if you have a MAGI above $175,000 as a single filer, or above $250,000 for those married and filing jointly. (It is not available at all to those whose tax status is married filing separately.)
Benefits of the new tax break
For many middle-income individuals and couples, this will make a significant difference at tax time. Most will be able to escape, or at least reduce, the taxation of their Social Security benefits.
And because the bonus deduction isn’t tied specifically to Social Security, others will get a break, as well. For example, lower-income retirees, who generally don’t owe taxes on their Social Security benefits, can also take advantage of the bonus deduction.
So can older adults who have decided to delay filing for their Social Security payments as long as possible in order to keep growing their monthly payment.
The reform recognizes the financial pressures retirees face today, from rising health care costs to housing instability, and aims to provide a buffer against these challenges.
And if supporters of the new law are correct, the tax relief will also have a positive impact on the overall economy — both locally and nationally — as retirees will have more money to spend on goods and services.
Here’s how the bonus deduction for older people works
The new deduction is referred to as a “bonus” because it can be layered on top of the standard deduction you take for your filing status, or on top of your itemized deductions, and the additional deduction that older adults already receive.
Here are some basic examples of what that could look like, based on 2025 deduction amounts, for taxpayers who are eligible for the full bonus deduction.
An eligible single filer, age 65-plus, could receive: $15,750 standard deduction + $2,000 annual additional deduction + $6,000 new bonus deduction = $23,750
An eligible married couple filing jointly, both 65-plus, could receive: $31,500 standard deduction + $3,200 annual additional deduction ($1,600 each) + $12,000 new bonus deduction ($6,000 each) = $46,700
Make the most of your bonus with proactive planning
How can you optimize the bonus deduction for the next four years — and into the future if it’s made permanent?
If you’re hoping to avoid paying taxes on Social Security, the bonus deduction alone may be enough to keep you under IRS thresholds for your filing status. If you’re single and your combined income is between $25,000 and $34,000 — or between $32,000 and $44,000 if you’re married filing jointly — 50% of benefits may be taxable.
If your combined income is over those limits, 85% of your benefits may be taxable. Though the bonus deduction won’t exempt everyone, it’s expected to deliver welcome relief for many retirees.
And with proactive planning, there may be other ways to benefit from the bonus deduction. You might find the time is finally right to do that Roth conversion, for example.
Or, if you had high medical bills or made a substantial gift to charity, you may want to look at itemizing this year.
You can also use the deduction to offset the taxes on required minimum distributions (RMDs).
Your financial adviser and/or tax professional can help you evaluate a variety of strategies that might suit your needs. But don’t delay: The clock is already ticking on this opportunity to pay less to Uncle Sam and keep more money in your pocket.
For many older Americans, that’s more important than ever.
The passage of the OBBBA represents more than a tax cut; it’s also the recognition of this generation’s contribution to the nation’s economy and an assurance that retirement shouldn’t come with new financial burdens.
And I expect, as its implementation continues, that the long-term effects of this innovative law could play a crucial role in shaping retirement policy for generations to come.
Kim Franke-Folstad contributed to this article.
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
