Financial Planning Tip September 2025

Under provisions of the One Big Beautiful Bill Act (OBBBA), everyone will see a small change to their standard deduction this year. Those over age 65 will see a much larger change. Here's what to know:

• The baseline change for the standard deduction increases by $750 for single filers and $1,500 for married couples. 

• For the years 2025-2028, those over age 65 will receive an additional $6,000 deduction. Married couples with both spouses over age 65 will receive an additional $12,000 added to their standard deduction. These are substantial increases! But...

• The additional deduction for those over age 65 is subject to a phaseout beginning with adjusted gross income over $150,000 for married couples ($75,000 single) and is eliminated completely for incomes over $250,000 ($175,000 single). 

• This increase comes in addition to normal increases to the standard deduction for those over age 65 and/or blind. See this graphic for details. 

• If you're looking for the promised "no tax on Social Security," this is the closest thing OBBBA has to delivering on that promise. Social Security benefits are still taxable, but the tax paid on them may be reduced by the provisions for additional deductions. 

Here's what we think seniors should do for the next four years in light of these changes: 

• As we discussed last month, the Qualifying Charitable Distribution (QCD) should be the preferred method for those over age 70½ to make charitable contributions. Please contact us if you'd like a refresher. 

• Those between age 65-70½ need to be aware of OBBBA's impact on their itemized deductions. Particularly for married taxpayers over age 65 with incomes under $250,000, there is an awfully high bar to itemize taxes. That means tax planning for deductions on mortgage interest, state and local taxes, and charitable contributions becomes irrelevant. 

• On the flip side, seniors with incomes over $250,000 ($175,000 single) should plan to lump as many deductions as possible in certain years and as few as possible in other years. This "grouping" strategy is made easier with a donor-advised fund (DAF), and a few other techniques your tax preparer may suggest. We think this is a good strategy for those under age 65, too.

As always, we're happy to help clients with any questions.