No one enjoys tax time, but it can be especially stressful if you're retired and living on a fixed income. An unexpected bill or a smaller refund than anticipated can throw off your entire budget, leaving you scrambling to catch up.
Fortunately, this scenario is a little less likely now that the new senior tax deduction is in play. Here's what to expect when filing your 2025 taxes this year.
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Who the new senior tax deduction benefits
The new senior tax deduction is available to seniors age 65 and older, regardless of whether they itemize deductions. All seniors hoping to claim this deduction must include their Social Security number on their tax return, and if married, a couple must file jointly to be eligible.
To claim the full deduction, single filers must have modified adjusted gross incomes (MAGIs) of $75,000 or less. Married couples filing jointly must have MAGIs of $150,000 or less.
Those with MAGIs over these limits may qualify for a partial deduction, or they may not be eligible for the new senior deduction at all. Those who are ineligible will still be able to claim the other standard senior tax deduction, which does not have an income limitation.
How the new senior tax deduction works
A tax deduction reduces your taxable income for the year. For example, if you have $50,000 in taxable income and you qualify for a $5,000 deduction, the government will only tax you on $45,000 that year.
The new senior tax deduction is worth up to $6,000 for single adults and up to $12,000 for married couples. This stacks on top of the standard deduction for your filing status and the other senior tax deduction, worth $2,000 for single filers or $1,600 each for married individuals.
Altogether, these deductions could significantly reduce the amount of money you have to pay taxes on this year. That means a smaller bill -- and possibly a larger refund -- for you.
You shouldn't have to do much work to figure out whether you qualify for the deduction. Your accountant or your tax-filing software should run the calculations for you and apply the new senior deduction if you qualify for it. If you have any questions about how it will affect your tax bill, reach out to a tax professional who can give you personalized advice.
Another thing to keep in mind is that this tax deduction is currently set to last only through the 2028 tax year. It's possible that it could get extended, but we have no way of knowing that right now. Keep an eye on this as we approach the 2028 deadline. If the new senior tax deduction expires, you may have to brace yourself for a higher bill going forward.
