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Donald Trump’s big sweeping spending bill included a sweetener for many seniors across America.
Individuals over the age of 65 can claim $6,000 as a tax deduction, as of their next tax filing, according to the Internal Revenue Service. Those who file joint returns can claim this amount individually, meaning a married couple could get deductions up to $12,000.
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Although this isn’t the elimination of all income taxes on Social Security that he promised while campaigning, this new subsidy could still be a helpful boost for those who qualify. However, the real impact of the deduction depends on your income bracket.
Here’s a closer look at how much you could save at different levels of income.
Low income
Low-income seniors might not notice this new deduction because they already receive a standard deduction that reduces or eliminates any income taxes they owe. As of 2024, the standard deduction for someone over the age of 65 is up to $16,550 individually and up to $30,750 for joint filers.
A significant number of American seniors fall into this category. According to the KFF, one in three adults over the age of 65 had an income below $28,080 in 2022.
This means that some low-income seniors simply don’t have the taxable income to apply an extra $6,000 deduction to, after accounting for the standard deduction.
Middle income
Households with relatively modest incomes could see the most benefit from this new deduction.
Because the deduction starts to phase out for single filers earning over $75,000 and married couples making over $150,000 — there is no deduction when income reaches $175,000 for individuals and $250,000 for couples — the Urban-Brookings Tax Policy Center projects that upper-middle-income households stand to gain the most.
Seniors with incomes between approximately $80,000 and $130,000 are expected to benefit the most from this provision, which would cut their taxes by an average of $1,100, or around 1% of their after-tax income, according to their calculations. Had Congress followed through on eliminating taxes on Social Security benefits, their tax break would have been around $1,300 instead.
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High income
Given that the deduction is fully phased out once individual incomes are above $175,000 and joint incomes above $250,000, high-income taxpayers won’t benefit from this new incentive.
Caveats
Given all the rules and limitations, this new tax rule could best be described as helpful but limited. The Urban-Brookings Tax Policy Center estimates that less than half of all seniors could see their taxes reduced from this new deduction.
The rule is also time-limited and only applies to federal income taxes between 2025 and 2028.
Altogether, the new deduction offers a modest cut for a highly specific group of seniors for a relatively short period of time.
However, it does have a long-term impact on other government programs that many seniors rely on: Social Security and Medicare.
The Committee for a Responsible Federal Budget (CRFB) projects that the new set of tax policies implemented by the One Big Beautiful Bill Act (OBBBA) will hasten the insolvency of both the Social Security and Medicare trust funds, moving their depletion date up from 2033 to 2032 — a full year sooner than previous forecasts.
Prepare yourself
With the possibility that Social Security and Medicare will be impacted by this new tax rule, it’s worth trying to reduce your reliance on these programs. There are many ways to take control of your finances so that you aren’t as vulnerable to the government’s next policy change.
Consider maximizing retirement savings in an IRA. If you’re 50 or older, you can also make catch-up contributions for the years you weren’t able to contribute.
But if you’re worried about rising inflation or the value of the dollar, you may want to decouple your retirement from the market a little bit.
One option is opening a gold IRA with Priority Gold. This can take advantage of the safe-haven nature of gold as an asset class, while still providing the tax advantages of an IRA.
This can be an attractive option if you are looking for strategies that might protect your retirement fund against economic uncertainties. Just keep in mind that gold works best when combined with other diversified investments.
To learn more, you can get a free information guide that includes details on how to get up to $10,000 in free silver on qualifying purchases.
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For seasoned investors with portfolios of $50K or more, you might consider diversifying your nest egg through a flat-fee self-directed retirement account.
A self-directed retirement account is a tax-advantaged individual retirement account (IRA) that lets investors allocate funds to a significantly broader range of alternative assets than typical IRAs offered by banks or brokerage firms.
While traditional IRAs limit options to stocks, bonds and mutual funds, a self-directed account allows you to invest in real estate, cryptocurrency, private businesses, precious metals and private lending.
With IRA Financial, you can work directly with experienced retirement specialists. If you prefer making your investments online, their platform and mobile app makes it easy to manage your account. They also have an in-house tax team to ensure your investments stay fully compliant with IRS rules.
With over $5 billion in retirement assets under custody, guaranteed IRA audit protection, 25,000+ clients nationwide and a 97% client retention rate, IRA Financial can help you grow your retirement fund with alternative assets.
Simply answer a few questions — including the kinds of assets you would like to invest in and how much you’d like to start with — to prequalify for an account in just 90 seconds.
Aside from your IRA, it’s worth ensuring you’re earning the best rate possible on your cash. The Arrived Private Credit Fund has a historical yield of 8.1% — which can make it a competitive alternative to a high-yield savings account, hovering around 4% APY.
Arrived’s Private Credit Fund offers a straightforward way to invest in real estate-backed debt investments, without needing to do the research and legwork of finding real estate investments yourself.
Although not as accessible as a high-yield savings account, you can still get quarterly liquidity options, which can provide greater flexibility than other real estate investments. And with the monthly dividend payouts, it can be a solid option to bolster your retirement fund.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.