AARP Backs Federal Tax Proposals That Would Benefit Older Americans

Offsets to Social Security income taxes and efforts to boost paid leave are on the table in Congress

Emily Paulin and Andy Markowitz,

Updated May 23, 2025

AARP

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Published May 05, 2025

/ Updated May 23, 2025

AARP (IRS.gov; Getty Images)

As Americans age, they often find themselves living on fixed incomes while facing rising costs for housing, health care, food and prescription drugs. For many, it’s a struggle to make ends meet.

That’s why AARP is supporting certain tax provisions within President Trump’s sweeping domestic policy bill, the One Big Beautiful Bill Act, which was passed by Republicans on a party line vote in the House on Thursday.

AARP opposes other proposals in the bill, including cuts to Medicaid, Affordable Care Act marketplace health coverage and the Supplemental Nutrition Assistance Program (SNAP), as well as the policy to keep prices high for certain types of prescription drugs.

The tax proposals backed by AARP would boost the bonus standard deduction for older Americans, improve tax credits for employers offering paid family and medical leave to workers, and improve tax credits for those developing affordable rental housing.

These tax changes would help bring financial relief to many older Americans, wrote AARP’s Nancy LeaMond, chief advocacy and engagement officer, in a letter to House leadership on Wednesday expressing AARP’s views on several key provisions in the bill.

“Millions of older Americans have worked hard, played by the rules, and now find themselves barely getting by,” LeaMond wrote. “What they need are common-sense policies that lower costs, make health care more affordable, and reflect the contributions they’ve made to this country.”

Bigger bonus deductions for those 65 and older

AARP is supporting a provision that would increase the additional standard deduction for taxpayers ages 65 and older. The increases would offset some — or even all — of the federal income tax charged on Social Security benefits.

“This is an important step that will provide meaningful tax relief at a time when many seniors are feeling financial strain,” LeaMond wrote in her May 21 letter. “For millions of older taxpayers, this change will help keep more of their Social Security benefits in their pockets.”

The tax code amendment would increase the additional bonus deduction for people ages 65 and over by $4,000. As with the standard deduction, the amount of the bonus deduction would be adjusted annually for inflation. The provision is largely based on the Bonus Tax Relief for America’s Seniors Act, which AARP endorsed on May 5.

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Social Security recipients with a total annual income of more than $25,000 for an individual or $32,000 for a couple filing jointly owe federal income taxes on their benefits. That applies to spousal benefits, survivor benefits and Social Security Disability Insurance, as well as to retirement benefits.

Those income thresholds have not changed for more than 40 years, LeaMond noted, effectively increasing the tax burden for Social Security recipients.

Tax credits to benefit older adults

A provision within the bill would extend and enhance a tax credit for employers who offer their staff paid family and medical leave (PFML), encouraging more businesses to offer the benefit. AARP believes that increasing PFML would help support the nation’s 48 million family caregivers, most of whom are ages 50 and older.

More than 60 percent of family caregivers are balancing caregiving duties with paid jobs, according to AARP research. Most working family caregivers are employed full-time while providing hours of care equivalent to those of a part-time job.

Meanwhile, the number of businesses — particularly small ones — that offer PFML is lagging, leading to financial and emotional strain for many family caregivers who don’t have access to the benefit. Roughly 40 percent of employees at businesses with more than 500 employees have access to PFML, while just 20 percent of workers at businesses with fewer than 99 employees have access to it, according to U.S. Bureau of Labor Statistics data.

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Under current law, businesses get a nonrefundable PFML tax credit ranging from 12.5 percent to 25 percent of the wages paid to employees on leave. The policy encourages businesses to offer eligible workers anywhere from two to 12 weeks of paid time off to care for a loved one, be that a parent, spouse or child.

The new legislation would make the PFML tax credit, due to expire at the end of this year, permanent and available in all states. Workers who have been on the job for at least six months, rather than a year, would be eligible to claim the credit. It also would allow employers to claim the credit on a portion of their paid family leave (PFL) insurance premiums. PFL insurance is often used by small businesses to provide paid leave to workers.

These changes will make PFML polices “even stronger going forward as more Americans take on family caregiving responsibilities,” LeaMond wrote in her letter.

AARP is also supporting a provision that would expand the Low-Income Housing Tax Credit (LIHTC), a federal tax incentive that promotes the development and rehabilitation of affordable rental housing.

The new legislation would increase the tax credits available to those building or fixing affordable housing and relax funding rules to make it easier to qualify. It also would add American Indian and rural areas to a special category for more support. If enacted, it would be the largest investment in affordable housing in decades, creating or preserving more than 527,000 homes over the next ten years.

A lack of affordable housing is a pressing issue for many older Americans. AARP’s 2024 Home and Community Preferences survey found that 44 percent of adults 50-plus anticipate relocating, with housing costs being a primary motivator. Seventy-one percent of this group cited rent or mortgage expenses as a key issue, and 60 percent cited the desire to lower housing and maintenance costs as a reason to move.

In another AARP survey of adults 50-plus, we found that 79 percent of respondents support expansion of the LIHTC.

“As the number of older adults living on fixed incomes continues to grow, too many are struggling to find stable housing they can afford,” LeaMond wrote. “This is the kind of policy that can help people live with dignity and independence.”

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Emily Paulin is an editor at aarp.org who covers nursing homes, health care, and federal and state policy. Her work has also appeared in Broadsheet, an Australian lifestyle publication.

Andy Markowitz is an AARP senior writer and editor covering Social Security and retirement. He is a former editor of the Prague Post and Baltimore City Paper.