The One Huge Lovely Invoice Act (OBBBA), signed into regulation in July 2025, set in movement a brand new tax break that would shift how seniors file their 2025 returns and plan for retirement earnings. The not too long ago launched senior tax deduction goals to supply extra reduction to taxpayers age 65 and older.

Who qualifies? Does the deduction apply to 2025 taxes? Do seniors nonetheless need to pay taxes on Social Safety? In the present day’s seniors are actively looking for solutions to those questions and can depend on their accountants to supply steerage.

Understanding the phase-outs and the nuts and bolts of the brand new deduction shall be key for tax professionals as they information purchasers by the upcoming submitting season.

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What’s the new Social Safety tax deduction?

Does the senior tax deduction apply to 2025 taxes?

Do seniors nonetheless need to pay taxes on Social Safety?

Tax planning methods for seniors

Itemizing vs. customary deduction

What tax preparers ought to anticipate this submitting season

What’s the new Social Safety tax deduction?

The OBBBA gives a brand new deduction capped at $6,000 yearly for sure taxpayers age 65 and older, starting in 2025. For married seniors who each qualify, they will declare as much as $12,000. For higher-income taxpayers, the deduction phases out.

For single taxpayers with earnings over $75,000 and married filers with earnings over $150,000, it phases out at a 6% price. Meaning, for each $1,000 in extra earnings over $75,000 for singles (or $150,000 for married seniors submitting collectively), the deduction will decline by $60. It’s totally phased out at $175,000 for single filers (or $250,000 for joint filers).

To declare the deduction, a taxpayer should be at the least age 65 on or earlier than the final day of the taxable yr. Taxpayers should additionally embody the Social Safety variety of the qualifying particular person(s) on the return, and if married, they need to file collectively.

“It’s going to be very useful for a few of our senior taxpayers, however is it going to be a whole exclusion? No, it won’t,” mentioned Shaun Hunley, Govt Editor at Thomson Reuters. “In some instances, you might even see some which are getting near having no tax on their Social Safety if that’s all they earn; if that’s the one earnings they’ve.”

President Trump, who has lengthy promised to finish the taxation of Social Safety, hailed the deduction as “the most important tax break in American historical past for our nation’s seniors,” claiming it resulted in “no tax” on Social Safety earnings for 88% (51.4 million) of all seniors receiving Social Safety earnings. It’s a declare that has been met with some skepticism and concern.

As an example, the Committee for a Accountable Federal Funds (CRFB) warned that the OBBBA would speed up Social Safety and Medicare insolvency by a yr, to 2032. The impacts could be oblique, mentioned CRFB, specifically by “decreasing the income collected from the earnings taxation of Social Safety advantages, which is deposited into the Social Safety and Medicare belief funds.”

Does the senior tax deduction apply to 2025 taxes?

Beneath the OBBBA, taxpayers can declare the deduction if they’re age 65 or older by December 31, 2025.

The brand new deduction is along with an additional extra customary deduction supplied to taxpayers age 65 and older that predates the brand new OBBBA provisions. For 2025, the extra customary deduction is $2,000 for qualifying single filers or those that file as head of family. For married taxpayers submitting collectively or individually, the additional customary deduction is $1,600 per qualifying particular person.

Do seniors nonetheless need to pay taxes on Social Safety?

Briefly, sure. For eligible seniors, the brand new senior deduction underneath the OBBBA can meaningfully cut back taxable earnings. Nevertheless, it doesn’t get rid of taxes on Social Safety advantages.

The long-standing rule that as much as 85% of Social Safety advantages could also be taxable stays in place. For these purchasers on the sting of the Social Safety tax thresholds, the change could also be noticeable; for these properly under the thresholds, the influence will possible be minimal.

Tax planning methods for seniors

With the brand new senior deduction in impact from 2025 by 2028, practitioners ought to strategy tax planning conversations with a watch towards timing and seizing alternatives.

For practitioners with purchasers who qualify for the senior tax deduction and will not be topic to phaseouts, the following few years might current an excellent window for income-producing strikes reminiscent of Roth conversions.

“If they’re taking full benefit, which means they don’t seem to be phased out of this deduction, that is in all probability a greater time to make a Roth conversion. Once you do this, you’re going to set off taxable earnings. Normally, from a planning standpoint, we attempt to do these conversions if you end up in a decrease tax bracket,” Hunley mentioned.

Hunley added, “Particularly in case you are married submitting collectively, you get a $12,000 further deduction. I’m considering now till 2028, that is in all probability the higher time to have a look at these conversions and see if they might work out.”

Additional strengthen your position as an advisor by speaking these methods clearly, serving to purchasers perceive that whereas the deduction presents near-term reduction, it additionally opens a tax planning alternative that is probably not obtainable after 2028.

Itemizing vs. customary deduction

Whereas the brand new senior deduction gives added reduction for qualifying seniors, it usually received’t change the elemental resolution between itemizing and claiming the usual deduction.

“Numerous seniors are in all probability taking the usual deduction [versus itemizing] … simply because it’s so excessive. For 2025, for those who’re submitting collectively, the usual deduction is $31,500, which is a extremely enormous quantity. On prime of that, there may be a further customary deduction for senior residents, after which, on prime of that, there’s this new enhanced deduction for seniors,” mentioned Hunley.

Hunley continued, “They may rise up to $46,700 when combining all three deductions. That’s an enormous quantity, so I might say, general, most seniors are in all probability taking the usual deduction, except they’ve excessive medical bills, as a result of that’s an itemized deduction. Professionals simply want to have a look at each [itemizing vs. standard deduction] and see what provides the consumer the very best end result.”

That mentioned, the brand new deduction does add a layer of complexity to the submitting course of. Preparers might want to verify every consumer’s eligibility (e.g., verifying age and Social Safety quantity) and calculate modified adjusted gross earnings (MAGI) to find out whether or not the deduction applies in full or begins to part out.

What tax preparers ought to anticipate this submitting season

Because the 2025 submitting season attracts close to, practitioners are prone to encounter higher consumer curiosity and questions in regards to the new Social Safety senior tax deduction. It’s vital to handle consumer expectations.

Tax preparers ought to assessment consumer information to find out eligibility and the place purchasers fall throughout the phaseout ranges. With the rollout of Schedule 1-A, a brand new attachment to Type 1040 that experiences all deductions created underneath the OBBBA, anticipate extra submitting steps and barely longer preparation occasions. Skilled tax preparation software program will have the ability to deal with these new calculations.

Moreover, strengthen your position as a trusted advisor by consumer schooling. Proactively clarify how this deduction ties in with the usual deduction, Social Safety taxation, and broader earnings methods reminiscent of Roth conversions.

Assist your purchasers benefit from the non permanent window by 2028 by staying updated on the newest developments and extra payments concentrating on this matter. Try the Thomson Reuters OBBBA Useful resource Middle for assist navigating the brand new Act this tax season.