Tax adjustments essential for retirees to monitor in 2025: a focus on four significant changes
In the upcoming 2025 tax year, a series of significant changes are set to take effect, providing increased tax relief for individuals aged 65 and older. The One Big Beautiful tax law, signed by President Trump on July 4, 2025, primarily extends provisions from the 2017 Tax Cuts and Jobs Act.
One of the most notable changes is the introduction of a new $6,000 temporary bonus deduction per senior taxpayer (age 65+). This deduction, available from 2025 through 2028, can reduce taxable income and totals up to $12,000 for couples filing jointly both aged 65 or older. The deduction phases out gradually for single filers with modified adjusted gross income (MAGI) above $75,000 and joint filers above $150,000, and fully phases out above $175,000 for singles and $250,000 for joint filers. This deduction is in addition to the existing increased standard deduction for seniors and is available regardless of whether the taxpayer itemizes or takes the standard deduction.
Another key change is the higher standard deduction for those 65+, indexed for inflation in 2025. Single filers age 65+ get a standard deduction of $17,750 (including the extra $2,000 senior amount), while married filing jointly with one spouse 65+ has a $33,100 deduction. Married filing jointly with both spouses 65+ can claim $34,700, reflecting an additional $3,200 total senior amount.
The tax law also includes a temporarily larger SALT (State and Local Tax) deduction cap, increased from $10,000 to $40,000 for tax year 2025, and scheduled to stay above $40,000 through 2029 before reverting down. This benefits taxpayers itemizing deductions with significant state and local tax payments.
A proposed policy to exempt capital gains tax on sales of a primary home for seniors or older adults has been discussed but is not yet enacted. This proposal, if passed, could provide significant savings for older adults looking to downsize, relocate, or move into retirement communities without worrying about a capital gains tax bill.
These key changes aim to provide increased tax relief for older taxpayers, particularly those with moderate incomes or significant itemized deductions. However, it is essential to consult with a trusted and qualified tax professional or financial advisor to understand how these and other major tax changes impact a specific situation.
It is also important to note that the Congressional Budget Office estimates that the GOP tax bill will add $4.1 trillion to the budget deficit over the next decade. Furthermore, the no capital gains tax on home sales bill would need to pass Congress, overcoming debates about its impact on the federal budget and the fairness of its tax policy.
The SALT deduction cap will temporarily increase to $40,000 per household for most taxpayers earning below $500,000, effective through 2029. Those above the income limit would be subject to the $10,000 cap.
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- The One Big Beautiful tax law introduces a new $6,000 temporary bonus deduction for senior taxpayers (age 65+), providing personal-finance benefits by reducing taxable income for individuals aged 65 and older.
- The tax law temporarily increases the SALT (State and Local Tax) deduction cap to $40,000 per household for most taxpayers, benefiting those who itemize deductions and have significant state and local tax payments, which is a part of the defi (definition: finance) sector.
