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AARP Supports Federal Tax Provision That Would Bring Relief to Older Americans
Offsets to taxes on Social Security benefits and an employer tax credit for caregivers passed in the Senate budget bill
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Tax provisions that could decrease taxes paid by older adults, allow for more caregiving leave and increase access to affordable housing are included in a budget bill heading for a final vote in the House.
The latest version of the One Big Beautiful Bill Act narrowly passed the Senate on Tuesday after several hours of voting overnight on amendments, in time to meet President Trump’s July 4th deadline. The massive spending bill, which now needs final approval from House members, includes new tax provisions as well as extensions to Trump’s previous tax breaks. However, the legislation also includes cuts to programs like Medicaid and the Supplemental Nutrition Assistance Program, which AARP opposes.
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But some of the proposals passed by the Senate could help older adults who often grapple with increasing costs on everything from housing to prescription drugs. An increase in the additional senior standard deduction for those 65 and older, from $1950 to $6000, would help offset taxes that many older Americans pay on Social Security benefits. This senior bonus deduction would be in addition to the standard deduction available to all taxpayers.
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“This increase delivers tax relief at a time when many older Americans are living on fixed incomes while facing rising costs,” wrote Nancy LeaMond, AARP’s executive vice president and chief advocacy and engagement officer in a June 29 letter to Senate leaders.
Increasing that deduction could help older adults in retirement offset some of the federal taxes paid on Social Security income. The income thresholds for owing federal taxes on Social Security, spousal benefits, survivor benefits, disability insurance and retirement benefits have not changed in 40 years, putting an extra burden on fixed incomes already under strain from the rising cost of living.
Caregivers could benefit
People providing care for ailing loved ones could also see positive changes under one of the bill’s provisions, which would expand the employer tax credit for companies that offer paid family leave and medical leave. The majority of caregivers are balancing work and caregiving responsibilities, providing an estimated $600 billion in unpaid labor, according to a 2023 AARP report.
For employers who offer their employers an opportunity to take paid family or medical leave to be caregivers, the federal government provides a tax credit. AARP also endorses a proposal in the budget bill to make that employer tax credit permanent. The current regulation regarding that tax credit expires at the end of the year, but if the budget bill passes with the proposed provision, there would be no need to continuously reapprove the credit.
The expansion of the tax credit for paid family and medical leave would provide “important support to employers whose workers are juggling jobs and caregiving responsibilities,” LeaMond wrote.
AARP also supports the provision to increase investment in affordable housing through the Low-Income Housing Tax Credit, which provides incentives for developing and rehabilitating housing that puts less of a strain on older Americans with a fixed income. If passed, the provision would make it easier for builders and investors to qualify for the tax credit and expand it to include housing construction in rural areas and American Indian communities.
“With a growing number of older adults struggling to find safe and affordable housing, these investments are timely and essential,” LeaMond noted in her letter.
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