If you're a cash-strapped senior, you may find it a little easier to manage your taxes next spring thanks to the "big, beautiful bill" that became law last month. Contrary to what some sources have said, it's not because the law eliminated Social Security benefit taxes. Those remain exactly the same as when the government first created them in the 1980s.
Instead, the law adds a new senior tax deduction worth up to $6,000 for a single adult or $12,000 for a married couple. This can significantly reduce your taxable income -- and your tax bill -- for the year. But before you get too excited, you'll need to qualify for the savings by meeting both of the qualifications below.
Image source: Getty Images.
1. You're at least 65 or older
The new senior deduction, like the previous senior tax deduction, is only available to adults 65 and older. If you're younger than this at the end of the year, you will not qualify for the deduction in 2025, even if you're claiming Social Security benefits. On the plus side, you may be eligible for the deduction even if you haven't signed up for Social Security yet.
2. You aren't a high earner
This tax deduction has income phaseouts that limit the savings available to high earners. If you're a single adult with an annual income of $75,000 or less in 2025 you'll qualify for the full $6,000 credit. The same goes for married couples with an annual income of $150,000 or less.
After this, the credit is subject to a 6% phaseout. So it drops by $60 for every $1,000 your income exceeds the above threshold for your marital status. For example, a single adult earning $76,000 would only qualify for a $5,940 deduction instead of the full $6,000 deduction.
If your income exceeds $150,000 for a single adult or $250,000 for a married couple, you will not be eligible for any new deduction under the law for the 2025 tax year. However, you will still qualify for the standard deduction and the existing senior tax deduction of $2,000 ($1,600 each for a married couple).
How much will the new deduction save you?
A tax deduction is basically income the government doesn't tax you on. So if your income was $60,000 this year and you qualify for a $12,000 tax deduction, you'll only pay taxes on the remaining $48,000.
The exact dollar amount you'll save depends on several factors, including your annual income and tax filing status. A Council of Economic Advisors report estimates that the average senior who qualifies for the new tax deduction will see an increase of $670 in after-tax income. But it's possible that you may save slightly more or less than this.
If you want a better idea of how much money you'll save under this new law, talk with an accountant who can give you advice on your specific situation. Also, keep in mind that if you end up earning more than expected during the rest of 2025 or withdrawing more from your tax-deferred retirement accounts, like your 401(k), than you planned, this could increase your tax liability for the year.
You should also bear in mind that, according to the law, the new senior deduction will only remain in effect through tax year 2028. After that, it's slated to go away unless the government chooses to extend it or make it permanent. So this is something to pay attention to if you don't want to be caught off guard in future tax years.
