OBBBA: Bonus Deduction for Seniors

"By LouAnn Schulfer, AWMA®, AIF® “The Wealth InFormation Lady”, Accredited Wealth Management AdvisorSM, Accredited Investment Fiduciary® , Published Author" |

The Omnibus Budget Reconciliation Bill for 2025, known as the One Big Beautiful Bill Act (OBBBA), made the Tax Cuts and Jobs Act of 2017 tax rates and standard deductions permanent, affecting a significant number of taxpayers. 

Taxpayers who are age 65 or older by December 31, 2025 may qualify for an additional deduction during tax years 2025 through 2028. Eligible individuals can claim a bonus deduction of $6,000 if filing as a single taxpayer, or $12,000 if married and filing jointly. Fortunately, the bonus deduction is available regardless of whether you take the standard deduction or you itemize. 

Some income limitations apply.  The deduction begins to phase out for taxpayers with an adjusted gross income (AGI) exceeding $75,000 for single filers and $150,000 for joint filers. The deduction is reduced by 6% of the amount of the AGI over the threshold. It phases out completely for single taxpayers with income above $175,000 and married taxpayers with income above $250,000.

This presents planning opportunities for creative thinkers.  For example, if your income is on the margin of disallowing you to claim the credit and you must take a Required Minimum Distribution and are over age 70 ½, you can consider a Qualified Charitable Distribution from your IRA to a 501c3 charity.  You are not taxed on the distribution, which in turn lowers your income, and it is still counted toward your RMD.  If you are working, consider a deductible contribution to an eligible retirement account to lower your income. 

Be careful when navigating the complexities of income calculations, since AGI is calculated before either the standard deduction or itemized deductions and AGI is a different calculation than the various formulas of Modified Adjusted Gross Income. It is always a great idea to seek guidance from a qualified tax professional.

This new provision of the OBBA is great news for our mature tax payers who either already qualify for, or through careful planning who can take advantage of, the new bonus deduction for seniors. 

 

LouAnn Schulfer of Schulfer & Associates, LLC Wealth Management can be reached at (715) 343-9600 or louann.schulfer@lpl.com TheWealthInformationLady.com  SchulferAndAssociates.com

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC. 

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.