If you’re 65 or older, 2025 is shaping up to bring several important tax changes that could impact your finances.
Here’s a look at four key tax updates — three are from President Donald Trump’s new tax legislation, known by some as the “One Big Beautiful Bill” (OBBB). Another potential change, not in the bill, is also getting a lot of attention.
Whether you’re retired, still working part-time, or just planning, these are worth knowing now so you can make the most of your tax situation.
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Tax changes for 2025 to watch
You may have heard that on July 4, 2025, President Trump signed massive reconciliation legislation into law. The new bill primarily extends many provisions from the original 2017 Trump tax cuts, known as the Tax Cuts and Jobs Act (TCJA). It also offers several new tax breaks and makes significant cuts and reporting changes to Medicaid and SNAP.
The Congressional Budget Office (CBO) estimates that the GOP tax bill will add $4.1 trillion to the budget deficit over the next decade. That’s up from earlier estimates of around $3.4 trillion.
(The latest number includes approximately $3.4 trillion in primary (non-interest) deficit increases plus about $718 billion in higher net interest costs due to increased borrowing.)
While Republicans tout Trump’s “big bill” as offering tax breaks for everyone, and critics express concerns, some OBBB provisions may be of particular interest to older adults and retirees. Here are a few.
1. The $6,000 bonus deduction for ‘seniors’ age 65 and older
Starting with the 2025 tax year, individuals age 65 and older will be eligible for a new, but temporary, tax break that could reduce their taxable income by an additional $6,000 per person.
This bonus deduction, which expires after 2028, is designed to benefit older taxpayers. Although some policy analysts estimate that it will likely be most helpful for retirees and older adults with middle incomes.
If you file jointly with your spouse and both of you are 65 or older, this could mean up to $12,000 in deductions on top of the usual standard deduction and the existing extra standard deduction for those 65 and over.
Additionally, the bonus deduction is available to eligible taxpayers who itemize deductions.
- Income eligibility is set at $75,000 for single filers and $150,000 for couples, and it gradually phases out.
- So, those with modified adjusted gross incomes (MAGI) above $75,000 for singles and $150,000 for joint filers will see a smaller deduction.
- The deduction is unavailable if MAGI exceeds $175,000 for single filers and $250,000 for joint filers.
But the provision is temporary. It will only be available from the 2025 through 2028 tax years and will supplement, but not replace, the existing extra standard deduction already available to older adults.
2. A higher standard deduction 2025 amount
The standard deduction — the primary way most taxpayers lower their taxable income — received a boost as part of the recent tax law updates.
For 2025, single filers can claim a standard deduction of $15,750, while married couples filing jointly can claim a standard deduction of $31,500.
When you combine this with the new $6,000 senior bonus deduction and the existing extra standard deduction, those 65 and older could potentially deduct up to $23,750 (single) or $46,700 (couples where both are 65+) from their taxable income.
3. Bigger SALT deduction cap
For those who itemize deductions, the cap on State and Local Tax (SALT) deductions jumps from $10,000 to $40,000 for most taxpayers earning below $500,000, effective through 2029.
- The SALT deduction cap will temporarily increase to $40,000 per household, but only for those with an adjusted gross income (AGI) of $500,000 or less.
- Those above that income limit would be subject to the $10,000 cap.
- Also, the limit would be subject to a 1% inflation adjustment.
Overall, this deduction change means that retirees paying significant amounts in state or property taxes can potentially deduct more from their federal taxable income.
For those who live in high-tax states like New York, California, or New Jersey, that could translate to thousands of dollars in tax savings.
4. Proposed: No capital gains tax on primary home sales
This is merely a proposal, but it’s generating chatter and could be a significant development for many retirees.
- Currently, an individual selling their primary home can exclude up to $250,000 in capital gains profit ($500,000 if married and filing jointly) from federal taxes.
- Any gains above that are taxed at normal long-term capital gains tax rates.
- But the home sale exclusion amounts haven’t changed since 1997 despite soaring home prices in many areas.
Now, a bill proposed by Rep. Marjorie Taylor Greene (R-Ga.) and supported by President Trump proposes eliminating capital gains taxes entirely on primary home sales, with no cap on the exclusion.
If passed, homeowners who have lived in their homes for decades could sell without owing federal tax on their profit.
That could provide significant savings for older adults looking to downsize, relocate closer to family, or move into retirement communities without worrying about a capital gains tax bill. It could also simplify estate planning and legacy decisions for some.
Keep in mind, this is a proposal and not yet law. The no capital gains tax on home sales bill would need to pass Congress, overcoming debates about its impact on the federal budget and the fairness of its tax policy.
However, if you currently own your home and plan to sell in the coming years, it’s a development worth watching.
2025 tax changes: Why these numbers matter
Many retirees and older adults live on fixed incomes and are juggling rising living costs with limited cash flow. Every tax dollar saved adds up to more breathing room in retirement, and these updates offer several ways to reduce your tax bill.
With half the year passed and mid-year tax planning happening, it’s good to consult with a trusted and qualified tax professional or financial advisor to understand how these and other major tax changes impact your specific situation.
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