Senior Tax Bonus: A Deep Dive
- Nick Allen
- Sep 9
- 3 min read
In July of 2025, Chief Financial Planning Officer Tim Hilterman wrote an article highlighting some of the changes to the tax law in the recent “Big Beautiful Bill.” In this article, we’re going below deck and exploring one of those changes in more detail – the Senior Tax Bonus.
A key feature of this bill is what’s being called the senior bonus, or senior deduction. Beginning in 2025 and running through 2028, taxpayers aged 65 or older can take an additional “bonus” deduction of $6,000 for single filers and $12,000 for those married filing jointly.
Functionally, this is like ordering a stack of three pancakes and getting a fourth. This bonus deduction stacks on top of the normal (also recently changed) standard deduction. Here is what the bonus deduction, stacked with the standard deduction, could look like:
Standard Deduction for 2025
· Single (65+): $15,750
o + $6,000 Senior Deduction
o + $2,000 extra deduction = Total Deduction of $23,750
· Married Joint (both 65+): $31,500
o + $6,000 Senior Deduction ($12,000 total)
o + $1,600 extra deduction per person ($3,200) = Total Deduction of $46,700
This is available whether or not you itemize or take the standard deduction. Still, it is important to note that there is a phase-out that applies for those above certain Modified Adjusted Gross Income (MAGI) thresholds. If you fall in one of these phase-out windows, your bonus deduction goes away:
· Single: $75,000-$175,000
· Married Joint: $150,000-$250,000
What It Means for Seniors
This change could mean significant tax relief for many retirees. A married couple over the age of 65 will be able to deduct $46,700 before paying a dime of federal taxes, potentially resulting in zero federal tax on social security for up to 88% of people. This is a 12% increase in the number of people who could be paying no tax on social security income.
Because this bonus is available alongside itemization, retirees get the benefit of writing off things like donations, mortgage interest, etc., that would not pair with taking the standard deduction, which of course can’t be claimed if you itemize. This also encourages some older folks to continue earning if needed, since the bonus deduction reduces taxes on that earned income as well, to some degree.
Examples:
· Single (65+): AGI = $85,000
o Standard Deduction: $15,750
o Senior extra: $2,000
o Bonus deduction: $5,400 (phased)
= Total Deduction: $23,150
· Married Joint (both 65+): AGI + Social Security = $72,000
o Get full $12,000 senior bonus deduction and likely owe little to no federal income tax.
The second example above is, in essence, the long-promised “no tax on social security.” It certainly isn’t a broad-sweeping no-tax on social security for all, but it can net out to such a reality for those people in certain income situations, in part, because of the new bonus deduction.
Key Highlights
To wrap up, let’s do a quick recap on this bonus deduction:
· Most eligible seniors will see a reduction in their tax bill
o Many Americans in the right situations will end up owing little to no taxes
· Works with itemization
o Unlike other deductions, this bonus works in conjunction with itemized deductions
· Income Thresholds
o This makes planning important when it comes to MAGI
· Short-Term
o This is set to expire after 2028, making it a brief window to maximize.
If you want to learn more about the impact of the recent tax bill or have other questions about taxes, reach out to our CPA, Kage Rush. Kage and Tim also did a recent webinar going over the One Big Beautiful Bill, discussing the changes. You can catch the replay on our YouTube Channel and watch other videos created by our team. Lastly, don’t forget to schedule a meeting with your financial advisor to talk more holistically about your savings strategy and overall plan for retirement.
