With the passing of the One Big Beautiful Bill (OBBB), everyone is asking themselves, “How will these changes impact me?” For those who reach the age of 65 before the end of the 2025, one of these changes is in a new senior deduction of $6,000 per individual who meet the age requirement. To qualify, the individual must have a Social Security Number and have a modified adjusted gross income (MAGI) of $75,000 or less for single tax filers and $150,000 or less if married filing jointly. The senior deduction will begin to phase out at these levels and completely phase out with MAGIs over $175,000 for single and $250,000 for married filing jointly. Examples of these phaseouts:
Single filer, age 70 with MAGI of $100,000
- Difference from MAGI and the limit at which the total deduction is received.
$100,000 – $75,000 = $25,000
- Divide by $100,000, the window between the $75,000 and $175,000 where the deduction begins to phaseout.
$25,000/$100,000 = .25
- Multiply $6,000 deduction by .25. This is the amount that phases out.
$6,000 *.2 5= $1,500
- Subtract the phaseout by the $6,000 to find eligible portion of deduction.
$6,000 – $1,500 = $4,500
This individual would be eligible to $4,500 of the senior deduction.
Filing Jointly, both are 81 with MAGI of $200,000
- Difference from MAGI and the limit at which the total deduction is received.
$200,000 – $150,000 = $50,000
- Divide by $100,000, the window between the $150,000 and $250,000 where the deduction begins to phaseout.
$50,000/$100,000 = .5
- Multiply $12,000 deduction by .5. This is the amount that phases out.
$12,000 * .5 = $6,000
- Subtract the phaseout by the $12,000 to find eligible portion of deduction.
$12,000 – $6,000 = $6,000
This couple would be eligible to $6,000 of the senior deduction.
This new senior deduction is in addition to the already existing standard deduction for seniors and can be utilized even if the filer(s) chooses to itemize. It should also be noted that the taxpayer does not have to be taking Social Security to take the deduction. Under the OBBB this additional deduction will only be in effect through tax year 2028.
If you have any questions, please reach out to your tax advisor within the firm.
