The House of Representatives passed their version of the The One Big Beautiful Bill Act. Now it is onto the Senate.
Below I discuss several ways the bill would help retirees if it enacted as is and provide thoughts on where we go from here.
Permanent extension of the 2017 TCJA greater standard deduction. Arguably the most important provision for retirees in the tax bill. It’s found in Section 110002 of the bill.
Regardless of age and income, the greater standard deduction helps retirees. From a planning perspective, it can be very helpful. The greater standard deduction opens the door for substantial Hidden Roth IRAs prior to collecting Social Security.
Permanent extension of the 2017 TCJA lower tax brackets, including the 12 percent tax bracket. Helps retirees of all ages and all but the lowest income levels. The lower tax brackets make traditional retirement accounts that much more attractive in retirement. Section 110001 of the bill text contains the permanent extension.
New senior bonus deduction ($4K per person). From 2025 through 2028, OBBB contains a provision increasing the standard deduction or itemized deductions by $4,000 per senior (those age 65). See Section 110103.
The new $4,000 per senior deduction phases out 4 cents on the dollar, by my initial reading, from $75,000 to $175,000 of modified adjusted gross income for singles and $150,000 to $250,000 of MAGI for those married filing joint.
This provision replaces No Tax on Social Security. Is it No Tax on Social Security? Absolutely not. Is it helpful for those 65 and older regardless of whether they are collecting Social Security? Absolutely.
This provision is likely to encourage seniors to delay collecting Social Security until age 70. Picture a 65 year old affluent retired couple. They likely don’t need Social Security now anyway. Why not keep delaying and use that new $8,000 tax deduction to shelter other income, such as a Roth conversion or a Hidden Roth IRA?
Note that this provision, and several other new provisions in the tax bill, last just four years. I’ve previously said there’s nothing more permanent than a temporary tax cut, which should be kept in mind when considering these provisions.
New addition to the standard deduction ($1,000 singles / $1,500 married filing joint). This provision is also in Section 110002 of the bill text. It too is for four years.
Higher SALT cap. The $10,000 maximum state and local tax deduction is increased to $40,000. I’m still very much assessing this, but my initial impression is that this may not help many retirees, who will pay little state income tax with proper planning and because many states, such as California, do not tax Social Security.
I think the big retiree beneficiaries here will be single and widowed homeowners in high property tax states such as New Jersey, who are now much more likely to itemize. This is a backdoor reduction of their Widow’s Tax Trap, a concern which tends to be overblown.
All Bronze Plans are automatically HDHPs. See section 110206. This could be a gamechanger for those retired prior to age 65. The idea would be to sign up for a Bronze plan, pay lower premiums, deduct HSA contributions, and then qualify for a higher Premium Tax Credit with the lower modified adjusted gross income.
This new rule would be effective January 1, 2026 and is permanent.
199A Qualified Business Income deduction made permanent and increased from 20 percent to 23 percent. See section 110005 of the bill. This helps early retirees by very slightly reducing their income tax on dividends from REIT funds, which do make up a small component of popular domestic equity index funds such as VTSAX.
Where We Go From Here
OBBB now heads to the U.S. Senate.
If I were making bets, and (a) I am not and (b) I am not providing you or anyone else with gambling advice, my first dollar, given even odds, would be on the remaining OBBB process being rather convoluted. My second dollar would be on a tax bill similar to OBBB being enacted during the summer of 2025.
Several things are possible. The SALT deduction will be an area of contention in the U.S. Senate. My hope is the amount of the $4,000 senior bonus deduction is increased, but I would not bet on that.
I think July is the month this does or does not get done, i.e., signed into law by President Trump. It could be sooner if the Senate decides, after much debate, to simply pass the House version of the bill, a theoretically possible, if not likely, outcome.
OBBB, Accumulators, and More
I have plenty of thoughts about how OBBB would impact accumulators. I will discuss the eventual tax bill’s impact on both accumulators and retirees in Tax Planning To and Through Early Retirement, the book Cody Garrett and I are currently writing and hoping to publish this year. You can sign up for updates on the book here.
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This post is for entertainment and educational purposes only. It does not constitute accounting, financial, investment, legal, or tax advice. Please consult with your advisor(s) regarding your personal accounting, financial, investment, legal, and tax matters. Please also refer to the Disclaimer & Warning section found here.