A new, temporary tax break could make the next four years some of the most favorable in recent memory for retirees. Beginning in 2025, taxpayers age 65 and older can claim an extra $6,000 per person deduction through 2028, which means a married couple could add $12,000 to their tax shield each year. This “senior bonus” stacks on top of the regular standard deduction and can lower taxes on Roth conversions, Required Minimum Distributions, and even strategic asset sales. The timing matters, because this deduction does not change your Adjusted Gross Income or provisional income, so it will not affect Social Security benefit taxation or Medicare IRMAA surcharges. Think of it as a four-year window to trim your tax bill while reshaping your retirement income plan.
What the new deduction is and who qualifies
The deduction is $6,000 per eligible taxpayer in tax years 2025 through 2028, and $12,000 for a married couple filing jointly when both spouses are 65 or older. It stacks with the standard deduction, so a 65-plus couple could see a combined deduction around $45,500 in 2025, based on a projected $33,500 standard deduction plus the $12,000 senior amount. You must be at least 65 by year-end and have a Social Security card, and the benefit is not available to those filing as married filing separately. There are income phaseouts that start at modified AGI of $75,000 for singles and $150,000 for married couples filing jointly. The deduction fully phases out above $175,000 for singles and $250,000 for joint filers. Technically, it is a below-the-line deduction, which lowers taxable income but does not reduce AGI or provisional income.
Why this deduction matters now
Because it is temporary, the deduction creates a four-year planning window to shift money out of pre-tax accounts, manage tax brackets, and pair with itemized deductions. It can help you stay in lower ordinary income and long-term capital gains brackets while still accomplishing key moves like Roth conversions. Since it can be used even when you itemize, there is a chance to stack deductions for more savings. Retirees in high-tax states can also combine it with a larger state and local tax deduction to keep taxable income in favorable territory. The payoff is greater flexibility without tripping AGI-based thresholds tied to Social Security or Medicare.
Strategy 1: Make Roth conversions cheaper
When you convert from a traditional IRA to a Roth IRA, the amount converted is taxed as ordinary income. The senior deduction can offset part of that income, which lets you convert more while staying in your target bracket. That is valuable if you want to reduce future RMDs, improve tax diversification, or lower the long-term tax bite for heirs. Example A: consider a 65-plus married couple with $20,000 of Social Security benefits, $5,500 of interest, and a $20,000 Roth conversion. Their total income considered in this simplified illustration is $45,500, and their combined deductions are roughly $45,500, which can effectively eliminate federal tax due on the conversion.
Example B: a 65-plus married couple in the 12 percent bracket with $70,000 of income takes the standard plus senior deduction of about $45,500, leaving roughly $24,500 of taxable income. Based on 2025 brackets, they could convert about $72,450 and remain in the 12 percent bracket, with amounts above that spilling into 22 percent. This approach is easier to manage if you spread conversions across 2025 through 2028 to use the senior deduction each year. It also helps you avoid a single large conversion that pushes you into higher marginal rates. Bracket management is the core of making this temporary break work for you.
Strategy 2: Cushion the tax cost of RMDs
The senior deduction will not change how your RMD is calculated, but it can reduce the tax bill in the year you take it. If RMDs are tipping you into a higher bracket, the extra $6,000 per person can help keep taxable income in check. Since the deduction does not reduce AGI, it will not change whether your Social Security is taxed or your Medicare premiums rise due to IRMAA. Even so, the net effect can be meaningful cash savings. Pair the deduction with Qualified Charitable Distributions where appropriate to deepen the impact without increasing AGI.
Strategy 3: Stack with itemized deductions
Unlike many special breaks, this one can be used even if you itemize. That opens the door for seniors with higher medical expenses, significant charitable giving, mortgage interest, or notable property and state income taxes to build a larger overall deduction. If your itemized deductions already exceed the regular standard deduction, adding the senior amount can deliver an outsized benefit. This helps turn big-ticket expenses that already exist into even more tax savings. The result is flexibility to choose the path that leaves you with the lowest taxable income.
Strategy 4: Pair with the expanded SALT deduction
The state and local tax cap is scheduled to increase to $40,000 through 2029. For retirees in high-tax states like California, New York, or New Jersey, this can be significant when combined with the senior deduction. Stacking itemized SALT with the senior amount can keep taxable income within lower brackets or below key phaseouts. That can be the difference between paying 0 percent vs. 15 percent on long-term gains, or 12 percent vs. 22 percent on ordinary income. It is a valuable lever for those with sizable property or state income tax bills.
Strategy 5: Harvest long-term gains at 0 percent
The 0 percent long-term capital gains rate applies when your taxable income stays within the lower brackets, which for planning purposes generally align with the top of the 12 percent ordinary bracket. The senior deduction helps you get taxable income under that threshold, which can make selling appreciated investments tax free at the federal level. Coordinate sales with Roth conversions so one does not push the other out of the 0 percent zone. If you are planning a home sale or a large portfolio rebalance, model the timing so these events happen in a year when the senior deduction and other deductions keep taxable income low. Always confirm current IRS thresholds for the exact 2025 limits before executing trades.
Make the four-year window count
This is a limited-time opportunity that rewards careful planning year by year. Run tax projections for 2025 through 2028 to sequence Roth conversions, RMDs, charitable gifts, and any major asset sales. Watch the income phaseout range, because losing the deduction late in the year can change the math. Remember that the deduction lowers taxable income but not AGI, so it will not help with Medicare IRMAA or the taxation of Social Security. Given the moving parts, consider partnering with a tax professional to maximize the benefit while avoiding bracket creep.
