The House-passed tax bill provides a temporary additional deduction of $4,000 for those over age 65 who have less than $75,000 ($150,000 for married couples) in taxable income. It also temporarily expands the standard deduction by $2,000 (married)/$1,000 (single taxpayers).
The special deduction for seniors is a proxy for making Social Security benefits tax-free, as called for by President Trump. The budget law rules governing reconciliation legislation prohibit changes to Social Security, so tax writers had to find a way to get to that result (tax-free Social Security income) without directly changing Social Security law. (Failure to do that would destroy the provision’s filibuster-proof status.)
The new deduction would be available for tax years 2025 through 2028.
Prospects: This provision has excellent chances of being included in the final bill, although the Senate may modify it to make it permanent (i.e., eliminate the expiration date of January 1, 2029).
NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org