Retirees Who Will Be Eligible For The Big Beautiful Bill's 'Senior Deduction'

One thing that the One Big Beautiful Bill Act (OBBBA) did not quite do was outright end the taxation of Social Security benefits. However, it did lower income taxes for people over the age of 65, and it may have enabled enough write-offs that most senior citizens can avoid paying federal income taxes on their benefits. And, it turns out, the bill may help senior citizens keep their homes — some of them anyway.

According to a June 2025 report from Realtor.com, certain tax breaks in the newly passed OBBBA will enable senior citizen homeowners to pursue new income tax deductions to help with rising home related expenses, such as property taxes, insurance rates, and utility costs. However, for those who don't earn much outside of their Social Security payments, the positive impact may be somewhat minimized. That's because Social Security isn't necessarily taxed unless a recipient earns income above a certain amount. Plus, the tax deductions seniors receive move downward as a person earn more income. In short, these tax breaks will primary benefit middle-income and upper-income seniors who file taxes every year.

Under the OBBBA, a single person over 65 can claim a $6,000 deduction on top of their standard deductions, while couples filing jointly can claim $12,000. However, this will sunset after 2028. Plus, an individual making more than $75,000 a year, or a couple earning more than $150,000 a year, the standard deduction lowers, while retired households earning over $175,000 (for single filers) or $250,000 (for couples) will be unable to use the deduction.

State and Local Tax, or SALT, is the maximum possible deduction for federal income taxes on things such as state income tax, property tax, and sales tax. Under the 2017 Tax Cuts and Jobs Act, passed during President Trump's first term, the SALT cap was $10,000. Under the OBBBA, the SALT limit is now $40,000. However, SALT can't be used on top of a standard deduction. So, before pursuing this, retirees will want to figure out if they should itemize their taxes.

If seniors do itemize their taxes, this new SALT deduction cap could be great for those who have trouble affording high tax U.S. states. Per Realtor.com, 40% of New Jersey homeowners were unable to deduct their property taxes under the 2017 tax law, but now just 1.6% of households in the state will have that same problem. Similarly, in California, 20.2% could not deduct their property taxes in 2017, dropping to just 1.8% under the new OBBBA write-offs.

This new SALT cap isn't just for senior citizens. It will also lower federal income taxes for households who opt for itemized deductions. The SALT limit could also stem the flow of high-income households that have moved from high tax states to places like Florida, which doesn't have a state income tax and where the average income of retirees is higher than the national average. 

The OBBBA's new deductions will be practically meaningless for impoverished seniors struggling to stay in their homes. The median personal income of those over 65 was about $32,000, according to 2023 U.S. Census Bureau data. Social Security payments aren't taxed unless a single filer earns more than $25,000 a year from wages, interest, taxable retirement (IRA and/or 401K) payments, dividends, or other sources, per the IRS. For couple filing jointly, the limit is over $32,000. Single retirees earning between $25,000 and $34,000 (or couples earning $32,000 to $44,000) will have up to 50% of their Social Security payments taxed, while those earning more than $34,000 (or $44,000 for couples) may see 85% of their benefits amounts taxed.

The White House has stated that these new deductions effectively eliminate federal income taxes for 88% of Social Security recipients. However, these tax breaks may also hasten Social Security's bankruptcy. Reducing taxes on benefits by $30 billion a year, as the OBBBA does, ensures that the trust funds for Social Security and Medicare may become insolvent by 2032, according to the Committee for a Responsible Budget, which may mean smaller Social Security payments for everyone in the near future.