As you likely know, Congress recently passed the One Big Beautiful Bill Act, and while there are many provisions, a handful are especially important for retirees.
In the first blog in our series covering the changes to U.S. tax policies in 2025, we discussed overarching changes that could impact everyone. In today’s blog, we will cover the four most significant tax implications for those who are retired or will be soon. We will also cover what business owners should know in the next blog.
Without further ado, let’s get started on the tax changes that will most directly affect retirees.
1. Higher Standard Deductions (2025–2028)
The headline change is a temporary increase to the standard deduction for retirees.
Starting in 2025, those age 65 and older can claim an additional “senior bonus” deduction of up to $6,000 for individuals and $12,000 for married couples through 2028. This is on top of the regular standard deduction and age-based amounts.
Why does this matter?
For many retirees, it could noticeably reduce taxable income and provide a window for lower effective tax rates. This is especially useful for Roth conversions, where shifting money from a traditional IRA to a Roth IRA might be done at more favorable tax costs.
2. Increased SALT Deduction (2025–2029)
The bill also raises the cap on the state and local tax (SALT) deduction.
While the previous cap was $10,000, the new law allows a much larger deduction (up to $20,000 for individuals and $40,000 for couples) beginning in 2025 and running through 2029. This is particularly meaningful for retirees living in higher-tax states.
3. Charitable Deduction for Non-Itemizers (Starting in 2026)
Beginning in 2026, retirees who don’t itemize will once again be able to deduct charitable cash contributions. The new limits are $1,000 for single filers and $2,000 for married couples filing jointly. This ensures that retirees who are generous but don’t itemize still receive some tax benefit from their giving.
4. Increased Estate Tax Exemption
The estate tax exemption, which sits at $13.99 million in 2025, will increase to $15 million in 2026, and it will be indexed to inflation thereafter. For wealthier retirees, this offers additional flexibility in estate planning and opportunities to pass on more wealth tax-free.
Why the Standard Deduction Change Matters Most for Retirees
Of all these changes, the temporary higher standard deduction is the most impactful. It creates a unique window of opportunity to reshape retirement tax planning, especially through Roth conversions, which can smooth out taxes over a lifetime and protect against future higher rates.
Bottom Line
The One Big Beautiful Bill Act creates important new planning opportunities, but the rules are complex and temporary. Most retirees will likely need professional guidance to make the most of these provisions.
The team at Master’s would welcome the opportunity to help you sort through the details and build a plan tailored to your situation — reach out today to start the conversation.
