Seniors can save money with tax provisions in the new “OBBBA” (“One Big Beautiful Bill Act”). The new law took effect on July 4, and it can save money for seniors in 2025 and future years.
Here is how thoughtful tax and financial planning can help you keep more of your wealth.
The “Taxman”
The Beatles sang in their 1966 song “Taxman”:
Let me tell you how it will be
There’s one for you, nineteen for me
‘Cause I’m the taxman
Yeah, I’m the taxman
Provisions in the new law might allow seniors to keep a bit more than “one.” Good guidance in your tax and financial planning might allow you to preserve more of your wealth.
5 New Provisions to Know About
Here are five provisions in the new law that could be especially valuable for you:
#1: $6,000 Seniors’ Special Extra Tax Deduction 2025-2028
Each senior age 65 and over can now take a special extra $6,000 deduction. For a couple with both spouses 65+, their special extra deductions would total $12,000.
This special extra deduction is in addition to both the standard (or itemized) deduction and the regular extra senior deduction. For 2025, the regular extra senior deduction is $2,000 for single filers. For married couples filing jointly, the regular extra senior deduction is $1,600 for each spouse.
The special extra $6,000 deduction phases out at higher incomes. For an individual, the phaseout begins at $75,000 modified adjusted gross income (MAGI). The phaseout ranges to a midpoint at $125,000 where the deduction is $3,000. It then increases in steps to end at $175,000 where the deduction is $0.
Similarly for a couple, the phaseout begins at $150,000 MAGI, increases in steps to a midpoint at $200,000 where the deduction is $6,000, and ranges to end at $250,000 where the deduction is $0.
It is important to know that the seniors’ special extra $6,000 deduction is temporary. It is in effect only for tax years 2025 through 2028.
#2: Standard Deduction Increases for Seniors (and All Filers)
Before the new laws in July, the 2025 standard deduction for single filers was set at $15,000. The new law increases the 2025 standard deduction by $750 to $15,750.
A couple’s 2025 standard deduction increases by $1,500 to $31,500. It had been $30,000 before July. These increases are permanent.
#3: State and Local Tax (SALT) Deduction Increased
Seniors who itemize can now deduct, for each tax return, up to $40,000 in state and local (SALT) taxes. SALT taxes include property and state and local income or sales taxes.
Prior to the new law, the SALT deduction was capped at $10,000. The higher cap at $40,000 might especially help seniors living in states with very high SALT taxes such as New York and California.
Households with adjusted gross incomes (AGI) at or below $500,000 can use up to $40,000 of the SALT deduction. However, households with AGI above $500,000 remain capped at $10,000.
The $40,000 cap is inflation-adjusted. It will rise by 1% each year through 2029. But it is also temporary. In 2030, the SALT cap would go back to $10,000 for everyone.
#4: No Tax on Tips or Overtime
Seniors might not have to pay federal taxes on money earned working overtime hours or received as tips. Up to $25,000 per year might be exempt.
Only certain jobs qualify, however, and the Treasury Department is required to soon provide a list of jobs that qualify.
This deduction applies only to federal income tax. Qualified tips and overtime earnings remain subject to Social Security, Medicare, and state and local income taxes.
This exemption starts to phase out at $150,000 MAGI for single filers and $300,000 for joint filers. It is temporary. It is in effect only for tax years 2025 through 2028.
#5: $1,000 / $2,000 Income Deduction for Charitable Donations
Seniors who take the standard deduction (instead of itemizing) can now receive a deduction for donations to charity. Previously, filers had to itemize in order to get the deduction for charitable donations.
Single filers now can make cash donations to qualified charities and deduct $1,000 from income. Couples filing jointly can deduct $2,000.
Taking this income deduction for charitable donations can start in the next tax year, 2026. It is permanent.
Crucial Tax and Financial Planning
Understanding and doing taxes can be complicated and confusing. They can be even more complicated and confusing when tax laws change.
Clear understanding and thoughtful planning can save seniors money. Guidance from a knowledgeable and experienced financial planner can help you navigate through changes and confusion.
Provisions in the new law and financial planning strategies might allow you to be a bit happier while hearing the “Taxman.”
Also read, 11 Most Asked Questions I Get About Taxes in Retirement as a Financial Planner.
Let’s Have a Conversation:
Would these new tax deductions help you with your finances? What additional information about these tax savers would you like to have? How will you plan to take advantage of some of these tax savers? Please join the conversation.
