President Trump’s sweeping domestic policy bill that passed the House on Thursday provides a $6,000 boost to senior citizens’ standard deduction from 2025 through 2028.
The new temporary tax break — $6,000 for individuals and $12,000 for couples — is for tax filers age 65 and older. It starts phasing out for those who earn over $75,000 ($150,000 for couples).
“Low-income seniors won’t benefit at all, and nor will very high-income seniors,” Marc Goldwein, senior policy director for the Committee for a Responsible Federal Budget, a nonpartisan group that advocates for fiscal responsibility, told Yahoo Finance.
“The biggest beneficiaries are upper-middle-class seniors with significant wealth, who have a lot of discretion over how much income to realize in a given year,” he said.
To be clear, this provision does not eliminate taxes on Social Security benefits as Trump promised in the campaign. It is a temporary income tax deduction, not a cut in the Social Security tax.
The new deduction could also accelerate Social Security and Medicare insolvency by a year, to 2032, per an analysis from the Committee for a Responsible Federal Budget.
Some background:
Most lower-income seniors don’t have enough of a tax liability to claim the new deduction. In 2022, the median income of older adults was $29,740, according to the National Council on Aging.
The majority of taxpayers claim the standard deduction, which is $15,000 (or $30,000 for couples) for 2025. Seniors who are single filers already qualify for an additional deduction of $2,000. (If you're married, filing jointly or separately, it's $1,600 per qualifying individual.)
Read more: Standard deduction vs. itemized: How to decide which tax filing approach is right
This newly passed short-term deduction raises that amount by another $6,000.
Not a Social Security tax cut
Taxation of Social Security benefits is a hot-button issue and often catches seniors at modest income levels by surprise.
Most states do not tax Social Security benefits, but about 40% of people who get Social Security must pay federal income taxes on their benefits, according to the Social Security Administration.
If you file a federal tax return as an individual and your combined income from all sources, including your Social Security benefit, is between $25,000 and $34,000, you may have to pay income tax on up to 50% of your benefits. If your income exceeds $34,000, up to 85% of your benefits may be taxable.
For joint filers, if you and your spouse have a combined income between $32,000 and $44,000, you may have to pay income tax on up to 50% of your benefits; if it's more than $44,000, up to 85% of your benefits may be taxable.
Story Continues“That's a big shocker for our clients,” Ryan Haiss, a certified financial planner at Flynn Zito Capital Management in Garden City, N.Y., told Yahoo Finance.
“A lot of our clients exceed the $44,000 of combined income for Married Filing Jointly, and it is just something that is understood, and we consider when planning for retirement,” Haiss added.
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Read more: Do you pay taxes on Social Security?
Have a question about retirement? Personal finances? Anything career-related? Click here to drop Kerry Hannon a note.
The new deduction could be a meaningful benefit for middle-income retirees, helping lower their overall tax bill. However, Haiss said, “because of those income limits, many higher-income retirees, especially those already taking RMDs and collecting Social Security, likely won't qualify.”
Most of the nearly 9 in 10 Americans age 65 or older collecting Social Security don’t pay tax on this income and it’s the bulk of cash they use to pay living expenses. The average monthly benefit: $1,975, which adds up to less than $24,000 a year.
Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 books, including the forthcoming "Retirement Bites: A Gen X Guide to Securing Your Financial Future," "In Control at 50+: How to Succeed in the New World of Work," and "Never Too Old to Get Rich." Follow her on Bluesky.
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