Tax Changes
- Steve Coker, CFP
- Jul 12
- 2 min read
On July 4th, 2025, Congress signed into law the “One Big Beautiful Bill Act” or “OBBBA”, bringing several significant changes to the tax law beginning in 2025. Here are the key changes that are most relevant for retirees:
1. Lower Tax Rates Made permanent
The current tax rates were scheduled to sunset at the end of 2025. The OBBBA now makes the current tax rates permanent. While keeping existing rates the same may not seem like a big deal, it is. Without this provision the tax brackets would have reverted to the higher pre-2017 rates, resulting in a stiff tax hike. The OBBBA removes the uncertainty of the sunset and makes the current tax rates permanent.
2. State and Local Tax Deduction raised to $40,000
The state and local tax (“SALT”) deduction was previously limited to $10,000. The OBBBA raises the maximum deduction to $40,000, which is a welcome change to those of us in high tax states like California. The provision does phase out for incomes above $500K and does revert back to $10,000 after 2029.
3. Senior Credit
The OBBBA adds a new, $6,000 credit for taxpayers aged 65 and older. The deduction does begin to phase out for incomes above $75,000 for individuals and $150,000 for married filing jointly. To be clear the $6,000 credit is per taxpayer, so a couple over the age of 65 would receive a $12,000 credit in addition to the standard deduction. This senior credit’s intent is to fulfill the goal of “no tax on Social Security”. While the provision does not technically address the taxation of Social Security, it does provide a deduction for an amount equal to what most Social Security recipients receive. For example, a married couple aged 65 or older filing jointly would receive at least the standard deduction of $30,000 plus $4,000 additional standard deduction for being 65 or older plus $12,000 Senior credit, making the first $46,000 of income essentially tax free.
We’ll go into additional details on the OBBBA next week during our quarterly webinar. Join us for more details on these provisions and more OBBBA tax law changes.
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