If you're retired or nearing retirement, there’s some welcome tax news on the horizon.
Thanks to the newly proposed 2025 tax legislation—officially dubbed the “One Big Beautiful Bill”—many retirees will no longer owe federal income tax on their Social Security benefits starting next year.
And no, that’s not a typo.
This change represents one of the most significant tax relief efforts we’ve seen for seniors in years. Here’s what you need to know.
A New $6,000 Senior Bonus Deduction
The bill introduces a special add-on: a $6,000 increase to the standard deduction for taxpayers age 65 and older.
Combined with the regular standard deduction, this additional amount will dramatically reduce the taxable income of most retirees. According to early estimates, roughly 90% of Social Security recipients will avoid federal income tax on those benefits altogether.
That’s a big jump from 2024, when only about 64% of retirees qualified for tax-free Social Security income.
What Could Your Deduction Look Like?
Here’s a quick breakdown of what this could mean for your 2025 tax return:
- Single taxpayers age 65 or older: up to $25,750 standard deduction
- Married Filing Jointly couples (both over 65): up to $43,900 standard deduction
That’s a significant amount of income completely shielded from tax.
Are There Income Limits?
Yes—higher-income retirees may see a reduced benefit.
- If your income exceeds $150,000 (Married Filing Jointly)
- Or $75,000 (Single and others)
You may not qualify for the full deduction or exemption. But even partial tax relief on Social Security is a step in the right direction for many retirees living on fixed incomes.
What This Means for You
Whether you're already retired or planning your retirement years in advance, these changes could create more flexibility in your budget. Less tax means more breathing room—for travel, hobbies, gifting, or simply enjoying your retirement without as much financial pressure.
But as with any tax law, proactive planning matters.
If you're not sure how these new rules will apply to you—or if you're looking for ways to minimize your tax bill in retirement—let’s talk it through.
Email me at kim@kimberlybagleycpa.com or book a call with me here to get clear on your retirement tax strategy for 2025 and beyond.