What to Know About the New Tax Deduction for Older Adults

Who qualifies? How much is it? Does it affect Social Security?

Rocky Mengle and Andy Markowitz,

AARP

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Published July 08, 2025

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Millions of taxpayers ages 65 and older got a big tax break in the “One Big Beautiful Bill”: a new $6,000 tax deduction, effective this year.

The deduction, which AARP supported, will reduce tax bills for many older Americans, starting with their next tax filing and running through the 2028 tax year, after which it is set to expire.

Applying the new deduction, though, may come with some complexity.

The deduction is available in full only to taxpayers with incomes below a certain level, and it phases out above that threshold. There has also been confusion among older adults as to whether the measure passed by Congress on July 3 and signed by President Donald Trump the next day eliminates taxes on Social Security benefit income.

In a July 3 email to beneficiaries, the Social Security Administration (SSA) said that, in addition to the new tax deduction, the bill “includes a provision that eliminates federal income taxes on Social Security benefits for most beneficiaries,” which it does not. The agency has since issued a corrected statement.

Here’s what you need to know about the new deduction.

Who is eligible for the deduction?

To qualify for the deduction, you must be at least 65 years old by the end of the tax year and have a modified adjusted gross income (MAGI) of less than $175,000. If you’re married and filing a joint tax return, your spouse can also claim the deduction if they’re 65 or older and your combined MAGI is less than $250,000.

How much is the deduction?

The maximum deduction is $6,000 per eligible taxpayer. For married couples filing jointly, the maximum deduction is $12,000 if both people are age 65 or older.

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However, the deduction is gradually reduced — potentially to $0 — if your MAGI exceeds $75,000, or $150,000 for joint filers. At that point, the deduction is reduced by six cents for every dollar over the applicable threshold. Once your MAGI reaches $175,000 for singles or $250,000 for joint filers, the deduction is fully phased out.

Suppose you’re single and have a MAGI of $100,000. Since your MAGI is $25,000 over the applicable threshold, the deduction is reduced by 6 percent of that amount, or $1,500. You can take $4,500 of the new deduction.

Does it replace the existing extra standard deduction for people 65 and older?

No. The new deduction is in addition to the existing extra standard deduction for people age 65-plus. For the 2025 tax year, that's $2,000 for single taxpayers and $1,600 per qualifying spouse for married couples filing jointly.

As a result, the new $6,000 deduction is stacked on top of both the regular standard deduction — $15,750 for single filers or $31,500 for married couples filing jointly in 2025 — and the 65-plus addition.For instance, a 65-year-old single taxpayer who qualifies for the full $6,000 deduction would be able to deduct a total of $23,750 from these three tax breaks on their 2025 tax return. A qualifying 65-year-old couple could deduct up to $46,700.

What if I’m itemizing?

You can claim the new deduction regardless of whether you itemize your taxes or claim the standard deduction.

If you itemize, you stack the new deduction on top of your itemized deductions. Let’s say you’re single, 65 years old, eligible for the full $6,000 deduction and have $40,000 of itemized deductions. If you have no other deductions, you can lower your taxable income by a total of $46,000.

Is the new deduction permanent?

No. The new legislation only authorizes the deduction for the 2025 to 2028 tax years. However, Congress could extend the tax break or make it permanent before it expires in 2029.

Does this mean Social Security benefits are no longer taxed?

No. The new tax law contains no provision ending taxation of Social Security benefits or changing how those taxes are calculated. You may still be liable for federal income tax on a portion of your benefits if your provisional income — your adjusted gross income (AGI), plus tax-exempt interest income, plus half of your Social Security income — exceeds $25,000 for a single filer and $32,000 for a couple filing jointly.

However, the new deduction could reduce the tax on benefits for millions of Social Security recipients, because it lowers overall taxable income.

For example, if the deduction pushes your provisional income below the $25,000/$32,000 thresholds, you won’t owe taxes on your benefits. Even above those levels, the lower your taxable income, the less you may owe in taxes on your benefits. (The IRS has an online tool you can use to calculate the bill.)

The new deduction does not affect tax status for more than 13.1 million Social Security beneficiaries who are under 65, including those who claimed retirement benefits at age 62 to 64 and most people collecting disability benefits.

The effective reduction of taxes on benefits would end in 2029, when the new deduction for people 65-plus is set to expire.

Will the deduction affect Social Security’s financial stability?

Yes. Unlike most income tax revenue, which flows into the general U.S. Treasury, taxes on benefits go into Social Security’s two trust funds, one for retirement and survivor benefits and one for disability benefits. In 2024, those taxes added $55.1 billion to Social Security’s coffers.

That represented only about 4 percent of the program’s total revenue, which comes mainly from payroll taxes assessed on U.S. workers and their employers. But reducing it would still have an impact on the trust funds, which are projected to run short of money in 2034 unless Congress acts to shore up Social Security’s finances. If that happens, benefits would be cut by about 19 percent, according to the latest annual report from Social Security’s trustees.

That’s for the two trust funds combined. The trustees project that the fund for retirement and survivor benefits, which faces the most significant gap, will run short in 2033. The Committee for a Responsible Federal Budget, a nonpartisan fiscal policy think tank, estimates that the new deduction and other provisions of the reconciliation bill will accelerate that fund’s insolvency by a year, to 2032.

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Rocky Mengle has more than 25 years of experience covering federal and state tax developments for CPAs, tax attorneys, and ordinary taxpayers, including stints at Kiplinger Personal Finance and Wolters Kluwer Tax & Accounting.

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.