How the “One Big Beautiful Bill” Affects Your Retirement
As you may have heard, on July 4, 2025, a major new tax law—nicknamed the One Big Beautiful Bill (OBBB)—was signed into law.
How the “One Big Beautiful Bill” Affects Your Retirement
Here are the highlights and what they mean for your retirement:
1. Higher Deductions & Lower Tax Rates Continue
First, the 2017 Tax Cuts and Jobs Act (TCJA) lowered tax rates and increased standard deductions, but those provisions were set to expire after 2025.
Now, the OBBB has removed that expiration date and even increased standard deductions for 2025 to $15,750 for singles and $31,500 for couples.
2. Additional Senior Bonus Deduction (Temporary)
The OBBB added a new “Senior Bonus” deduction of $6,000 per person age 65+ ($12,000 per couple) from 2025 through 2028. This deduction is on top of the existing $2,000 (single) and $3,200 (married, both over 65) additional deductions for taxpayers over age 65.
This senior bonus can even be used if you itemize deductions. This bonus deduction begins to phase out at Modified Adjusted Gross Incomes (MAGI) of $75,000 (single) and $150,000 (couple), and is completely eliminated at MAGI of $175,000 (single) and $250,000 (couple)
3. SALT Cap Raised (Temporarily)
The cap on state and local tax deductions jumps from $10,000 to $40,000—but only through 2029 and only for households earning under $500,000.
4. Estate Tax Opportunity
Starting in 2026, the estate tax exemption increases to $15 million per person ($30 million for couples), and the joint exemption carries over to the surviving spouse. Now is a good time to revisit your estate plan.
5. Charitable Deductions
Starting in 2026, if you take the standard deduction, you can deduct 100% of you charitable contributions up to $1,000 (single) and $2,000 (couple).
If you itemize your deductions, starting in 2026, your charitable contributions must exceed 0.5% of your AGI to be deductible.
What Didn't Change?
The OBBB did not make changes to the following areas affecting retirees:
- How Social Security tax is calculated (same provisional income formula)
- HSA contributions (Medicare enrollees still cannot contribute for themselves)
- Retirement account rules
We'll be taking these changes into consideration as we move into 3rd and 4th quarter tax planning.
Sources:
https://www.definefinancial.com/blog/one-big-beautiful-bill-retirement-planning/
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