3 Things All Retirees Need to Know About the New Senior Tax Deduction

Now that we're more than a month into the new year, tax season is in full swing. Many people having already received their necessary tax forms (W-2s, 1099s, and the like) and started filing. For some people, tax season means a new bill; for others, it's a nice check. Last year, the average refund paid out was $3,167.

Regardless of where retirees fall between the two, they can expect a more positive outcome this year due to a new senior tax deduction included in President Donald Trump's "big, beautiful bill." The deduction is slated to run from tax year 2025 (the one you're filing this year) through tax year 2028.

If you're a retiree who's filing taxes or will be soon, here are three things you should know about the deduction.

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1. How much is the new deduction?

When you file taxes, you have the option to take a standard deduction or itemize your deductions (listing each deduction individually). You have to pick one -- you can't do both. However, most people take the standard deduction because it's the higher of the two and much easier to claim.

For tax year 2025, the standard deduction is $15,750 for singles and $31,500 for couples filing jointly. For people 65 and older, another $2,000 (for singles) and $3,200 (for couples) is added to the deduction.

For seniors, the new tax deduction is an additional $6,000 if you're single and $12,000 if you're married and filing jointly. This would bring the total deduction for singles to $23,750 ($15,750 + $2,000 + $6,000), and the total deduction for couples to $46,700 ($31,500 + $3,200 + $12,000).

There's no special form you need to fill out for the deduction. It will automatically be applied if you take the standard deduction.

2. Who is eligible for the new deduction

There are age and income requirements to be eligible for the new deduction. To begin with, you must have turned 65 by Dec. 31, 2025. To receive the full $6,000, someone single would need to earn $75,000 or less. Married couples filing jointly would need their modified adjusted gross income (MAGI) to be $150,000 or less.

Once you have earned more than that limit, the amount of the deduction begins to reduce by 6% of the amount by which your MAGI exceeds the threshold. It's not until someone single earnings $175,000 and a married couple earns $250,000 that they would become ineligible for any deduction.

3. It doesn't eliminate the federal Social Security tax

The new deduction doesn't eliminate the federal Social Security tax (although it was sometimes touted as doing so), but it could potentially wipe out what you owe. The amount you potentially owe in federal taxes on your Social Security benefits (yes, benefits are taxed) depends on your "combined income." This is the combination of half of your annual Social Security benefit, your adjusted gross income, and any nontaxable interest.

If you're single and your combined income is between $25,000 and $34,000, up to 50% of your benefits are eligible to be taxed. If it's more than $34,000, up to 85% is eligible.

If you're married and filing jointly and your combined income is between $32,000 and $44,000, up to 50% of your benefits are eligible to be taxed. If it's more than $44,000, up to 85% is eligible.

With the new deduction, many retirees will see their taxable incomes fall below the deduction, wiping out any taxes they might owe.

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