Congressional compromise brings individuals over 65 a $6,000 Senior Deduction added to standard deduction.
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While there had been discussion of eliminating tax on Social Security, a compromise in Congress was to provide individuals over 65 with a $6,000 Senior Deduction added to the standard deduction. This added deduction is available for 2025-2028. The deduction phases out at a rate of 6% of the excess amount for single taxpayers with incomes over $75,000 and married couples filing jointly with incomes over $150,000. The deduction is fully phased out for single taxpayers with incomes over $175,000 and married couples filing jointly with incomes over $250,000.
The effect of this $6,000 deduction will reduce taxes for many taxpayers. Here are some scenarios to consider:
Susan*/Single Susan is 78, has Social Security of $28,000 and other income, for a total of $34,000. A single senior has a 2025 standard deduction of $15,750, an existing $2,000 deduction for those 65 and over, plus $6,000, for a total of $23,750. Because her combined income is over $25,000, part of her Social Security is tax-free and part is taxable. With her standard deduction, tax-free portion of Social Security and the added $6,000 Senior Deduction, Susan will pay zero federal income tax.
Helen/Single Helen, 82, has Social Security of $36,000, a large IRA payout and other income, for a total of $100,000. A senior filing as a single taxpayer has a 2025 standard deduction of $15,750, as well as the existing $2,000 additional deduction and the new Senior Deduction. However, Helen’s Senior Deduction is reduced because she has over $75,000 in income, to $4,500 for a total of $22,250. Because her income is over $34,000, a larger portion of her Social Security is taxable. While her $4,500 Senior Deduction saves some, Helen is likely to pay about $6,000 in income tax.
Jim and Kate/Married Jim is 80 and Kate is 78. They receive Social Security of $44,000 and other income, for a total of $75,000. A married couple filing a joint tax return can claim a 2025 standard deduction of $31,500 and the existing senior deduction of $3,200, plus the new Senior Deduction of $12,000, for a total of $46,700. Because their income is over $32,000, part of the Social Security is tax-free and part is taxable. With their standard deduction, tax-free portion of Social Security and the added $12,000 Senior Deduction, Jim and Kate will pay zero federal income tax.
Joe and Alice/Married Joe is 84 and Alice is 79. They receive Social Security of $64,000, a pension, two large IRA payouts and investment income, for a total of $200,000. A married couple filing a joint tax return benefits from a 2025 standard deduction of $31,500 plus a Senior Deduction. Because their income is over $150,000, the $12,000 Senior Deduction is reduced to $9,000. The standard deduction, existing $3,200 deduction, plus the Senior Deduction equals $43,700. Because their income is over $32,000, part of the Social Security is tax-free and part is taxable. With their standard deduction, tax-free portion of Social Security and the added $6,000 Senior Deduction, Joe and Alice are likely to pay about $22,000 in income tax.
This content is for informational purposes only and does not constitute legal or tax advice. Individuals should consult with a qualified tax professional or adviser for advice specific to their personal financial situation.
*Please note: The information above is representative of a typical donor and may or may not be an actual donor to our organization. The American Legion’s Fund Development program, a way of establishing your legacy of support while providing for your current financial needs. Consider naming The American Legion in your will or trust as a part of your personal legacy. Learn more about the process, and the variety of charitable programs you can benefit, at legion.org/plannedgiving. Clicking on “Learn more” will bring up an “E-newsletter” button, where you can sign up for regular information.
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