4 Ways the ‘One Big Beautiful Bill’ Could Change Your Tax Bill

$6,000 bonus deduction for older adults among key provisions

Maya Dollarhide,

Updated July 04, 2025

AARP

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En español

Published July 03, 2025

/ Updated July 04, 2025

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Noopur Choksi

The reconciliation bill signed by President Donald Trump on July 4, one day after it narrowly won final passage in Congress, extends the tax cuts enacted during Trump’s first term and implements dozens more changes to the tax code. Here are some of the elements most likely to affect older adults.

No change in income tax rates

The 2017 Tax Cuts and Jobs Act (TCJA) lowered five of the seven personal income tax brackets, including the top rate, which dropped from 39.6 percent to 37 percent. Those rate reductions were set to sunset at the end of 2025, but the One Big Beautiful Bill Act, as the measure is widely called, makes them permanent.

The new law also permanently establishes the larger standard deduction that was included in the 2017 legislation but was set to expire after this year. It also increases the 2025 standard deduction from $15,000 to $15,750 for an individual taxpayer and from $30,000 to $31,500 for a married couple filing jointly.

Bigger deduction for older adults

Americans ages 65 and older can claim an extra standard deduction ($2,000 for a single filer, $1,600 per qualifying spouse in a couple) on top of the standard deduction available to all taxpayers who don’t itemize. The reconciliation bill adds a 65-plus bonus deduction of $6,000, through the 2028 tax year.

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Unlike the standard deduction, older taxpayers can take this bonus deduction whether they itemize or not.

AARP supported the provision, saying it would help offset the taxes many Social Security recipients owe on their benefit payments. The new deduction “delivers tax relief at a time when many older Americans are living on fixed incomes while facing rising costs,” Nancy LeaMond, AARP’s chief advocacy and engagement officer, wrote in a June 29 letter calling on Senate leaders to back the bonus deduction.

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Who qualifies? Individuals with incomes of up to $75,000 ($150,000 for spouses filing jointly) can subtract the full $6,000 from their taxable income. The deduction phases out at higher income levels, and you can’t claim any of it if you earn more than $175,000 ($250,000 for a couple).

For example, in 2025 a 65-plus married couple with a combined income of $120,000 can take the standard deduction ($31,500 for joint filers), plus the existing age-related addition ($3,200), plus the new bonus ($6,000 each), reducing their taxable income by $46,700.

Deduction for car loans

Americans ages 50 and older took out $66 billion in new auto loans in the first quarter of 2025, about 40 percent of all new vehicle loans, according to LendingTree. The new law allows borrowers to deduct up to $10,000 in car loan interest payments for the next four tax years.

There are a couple of caveats. First, the vehicle must have undergone final assembly at a U.S. factory. Second, eligibility is tied to income: If you earn more than $100,000 (individual) or $200,000 (couple filing jointly), the deduction tapers off by $200 for every $1,000 of additional income. If you are a single filer earning $120,000, for example, you can deduct $6,000 of car loan interest.

SALT deduction

The 2017 tax law introduced a $10,000 cap on the amount of state and local tax (SALT) payments people could deduct from their federal taxes. The new law temporarily increases the threshold to $40,000 for taxpayers with a modified adjusted gross income below $500,000.

The provision could provide significant savings for homeowners who live in states and communities with high property taxes and property values. Older Americans are more likely to be in this group: While 63.1 percent of all U.S. adults own their homes, the rates rise to 75.7 percent of people ages 55 to 64 and 79 percent of those 65 and older, according to a Bankrate review of Census Bureau data.

The SALT deduction cap will increase by 1 percent a year until 2030, when, under the new law, it reverts to $10,000.

Other tax provisions, while not directly affecting individuals’ tax bills, could have important economic ramifications for family caregivers and lower-income homeowners. These include:

Enhanced business tax credit for paid family leave. The new law extends and expands provisions of the 2017 measure that benefit people caring for ailing loved ones, via tax credits for employers that offer paid family and medical leave.

The credit, which was set to expire at the end of 2025, is now permanent. In addition, employers can now offer it to workers after six months of employment; previously, the minimum service requirement was a year.

The expanded credit provides “important support to employers whose workers are juggling jobs and caregiving responsibilities,” LeaMond wrote in her June 29 letter.

Expanded tax credits for low-income housing. According to a May 2025 AARP survey, nearly 4 in 5 adults ages 50 and older support tax credits to encourage investment in housing for low- and moderate-income households. The new law expands the Low-Income Housing Tax Credit, a federal incentive for developers to build and renovate affordable housing.

Among other steps, the law extends an increase in federal allocations to the states for disbursing the credits and makes it easier for builders and investors to qualify. “With a growing number of older adults struggling to find safe and affordable housing, these investments are timely and essential,” LeaMond wrote.

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