Making the most of the limited time deduction for seniors

Starting in 2025, individuals age 65 or older may be eligible for a new “senior deduction” of up to $6,000 under the One Big Beautiful Bill Act (OBBBA). However, this deduction is subject to an income-based phaseout that can reduce — or even eliminate — the benefit. The good news: with a little year-end planning, you may be able to preserve this valuable deduction.

Who Qualifies

You don’t need to be receiving Social Security benefits to qualify. If you’re age 65 or older by December 31 of the tax year, you may claim the deduction.

• Single filers: Eligible for up to a $6,000 deduction.

• Married couples filing jointly: If both spouses are 65 or older, each can claim $6,000 — for a combined total of up to $12,000.
  (Note: Married couples filing separately aren’t eligible.)

Combining With the Standard Deduction

Seniors already benefit from an additional standard deduction. When combined with the new senior deduction, the total potential deduction can be significant. Here’s how it looks for 2025:

• Single filer (65 or older):

  • Basic standard deduction: $15,750

  • Additional senior standard deduction: $2,000

  • New senior deduction: $6,000
    Total potential deduction: $23,750

• Married filing jointly (both 65 or older):

  • Basic standard deduction: $31,500

  • Additional senior standard deductions: $3,200 (two × $1,600)

  • New senior deductions: $12,000 (two × $6,000)
    Total potential deduction: $46,700

Understanding the Phaseout

The senior deduction begins to phase out when modified adjusted gross income (MAGI) exceeds:

• $75,000 for single filers

• $150,000 for joint filers

The deduction is completely phased out at:

• $175,000 for single filers

• $250,000 for joint filers

Your deduction is reduced by 6% of the amount your MAGI exceeds the threshold. (MAGI typically equals your AGI, plus certain types of tax-exempt foreign income — which most taxpayers don’t have.)

Examples:

1. Single filer, age 65
   MAGI = $130,000
   Reduction = 6% × ($130,000 − $75,000) = $3,300
   New deduction = $6,000 − $3,300 = $2,700

2. Married couple, both 65+
   MAGI = $220,000
   Reduction per spouse = 6% × ($220,000 − $150,000) = $4,200
   New deduction per spouse = $6,000 − $4,200 = $1,800
   Combined deduction = $3,600

Year-End Planning Strategies

If your income is close to — or above — the phaseout range, consider taking steps before year-end to reduce your MAGI. Here are several strategies that may help:

• Harvest capital losses in taxable accounts to offset capital gains.

• Defer sales of appreciated investments to avoid triggering additional taxable gains.

• Maximize pre-tax retirement contributions, such as traditional 401(k) deferrals, to reduce taxable income.

• Spread out Roth conversions over multiple years to avoid a large MAGI spike in one tax year.

• Use Qualified Charitable Distributions (QCDs) from IRAs (if age 73+) to satisfy required minimum distributions (RMDs) while keeping the amount out of taxable income.

Depending on your financial situation, there may be other ways to manage your income level strategically.

A Meaningful Tax Benefit

The new senior deduction can provide a valuable tax break for retirees and older taxpayers. Proactive planning can help you maximize the benefit and avoid losing it to income phaseouts.

If you’d like personalized guidance, our team can help you evaluate your income picture and implement strategies to preserve this deduction — and optimize your overall tax position.