After weeks of being cussed and discussed, debated, dismantled and reassembled, the One Big Beautiful Bill is now law. America’s senior citizens hoped it would eliminate taxes on Social Security, but that didn’t happen. It did, however, provide senior citizens with some temporary tax relief.
Under current IRS regulations people age 65 and up receive the standard deduction plus an additional senior citizen deduction. For tax years 2025-2028, every taxpayer age 65 and older will also receive a Senior Bonus—an additional $6,000 deduction no matter whether you file taxes using the standard deduction or itemize. It looks like this:
2025 standard deduction for singles $15,000
Additional deduction for filers over 65 2,000
_______
TOTAL: $17,000
2025 standard deduction for joint filers $30,000
Additional deduction for joint filers 3,200 ($1,600 per person over 65)
_______
TOTAL: $33,200
Add in the new Senior Bonus of $6,000 and the total 2025 standard deduction is:
Single $17,000 + $6,000 = $23,000
Joint $33,200 + $12,000 ($6,000 each if over 65) = $45,200
And, as mentioned, the Senior Bonus also applies to people who itemize deductions. So, if you’re a single filer you get another $6,000 of deductions. If you are joint filers and both of you are 65 and up you get $12,000 of additional deductions.
The Senior Bonus phases out for people with higher incomes.
- Single filers get the full deduction with MAGI of $75,000 and lower. It phases out beginning at $75,000 and disappears at $175,000.
- Joint filers get the full deduction with MAGI of $150,000 and lower. It phases out beginning at $150,000 and disappears at $250,000.
All of this means more money in your pocket. But there are two other possible advantages to the Senior Bonus. One is Roth IRA conversions. They’ve always been popular because you can move funds from your traditional IRA into your Roth where you have more flexibility and can take tax-free withdrawals.
The drawback has always been taxes. The converted amount is added to your taxable income in the year of conversion, potentially pushing you into a higher tax bracket. But now, with the $6,000 Senior Bonus, you have the potential to convert more money into your Roth without finding yourself in a higher tax bracket. By the way, there is no age limit on doing Roth conversions.
In a similar fashion, the Senior Bonus deduction may help offset more investment capital gains for eligible seniors by reducing their overall taxable income. Or the bonus may potentially lead to a lower tax bracket and thus a lower capital gains tax rate.
But, a word of caution. Before you decide to pursue Roth conversions or capital gains harvesting because of the Senor bonus, get advice from a financial or tax professional to make sure those strategies are right for you. You never want to end up on the wrong side of the IRS.
This information is presented for informational purposes only and does not constitute an offer to sell, or the solicitation of an offer to buy any investment products. None of the information herein constitutes an investment recommendation, investment advice or an investment outlook. The opinions and conclusions contained in this report are those of the individual expressing those opinions. This information is non-tailored, non-specific information presented without regard for individual investment preferences or risk parameters. Some investments are not suitable for all investors, all investments entail risk and there can be no assurance that any investment strategy will be successful. This information is based on sources believed to be reliable and Alhambra is not responsible for errors, inaccuracies, or omissions of information. For more information contact Alhambra Investment Partners at 1-888-777-0970 or email us at info@alhambrapartners.com.
