What the 2025 Tax Law Changed for Retirees
A $6,000 senior deduction for 2025 through 2028, permanent brackets that end the rush to convert before 2026, a charitable deduction for non-itemizers, and a $15 million estate exemption. Social Security was not made tax-free. Here is what applies in 2026 and what is scheduled for 2027.
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The 2025 tax law (Public Law 119-21, signed July 4, 2025) gave retirees a new deduction, took away a deadline, and left the taxation of Social Security exactly where it was. The new $6,000 senior deduction runs from 2025 through 2028. Permanent brackets mean there is no 2026 rate increase to beat. And from 2026, retirees who take the standard deduction can deduct some charitable gifts again. This page covers what applies to retirees and pre-retirees in 2026 and what is scheduled for 2027.
The changes at a glance: 2025, 2026 and 2027
Every row is a federal provision of the 2025 law. Figures for 2026 come from IRS Rev. Proc. 2025-32. Where the IRS has not yet published 2027 inflation-adjusted amounts, the table says so; those come out in late 2026.
| Provision | What changed | Effective dates | Who it affects | 2026 | 2027 |
|---|---|---|---|---|---|
| Senior deduction | A new $6,000 deduction for each taxpayer age 65 or older ($12,000 if both spouses qualify), on top of the existing extra standard deduction for age 65. Each $6,000 shrinks by 6% of MAGI above $75,000 ($150,000 joint). Requires an SSN and a joint return if married. | Tax years 2025 through 2028 | Everyone 65 or older by December 31 with a valid SSN, whether or not they itemize. Married couples must file jointly. | Same $6,000 and thresholds. The separate age-65 add-on to the standard deduction is $2,050 single or $1,650 per married person. | Same $6,000 and thresholds, not indexed. Ends after 2028. |
| Tax brackets and standard deduction | The 10% to 37% bracket structure and the higher standard deduction became permanent instead of expiring after 2025. The law also raised the 2025 standard deduction to $15,750 single, $31,500 married filing jointly, $23,625 head of household. | Permanent, starting with 2025 | Retirees and pre-retirees planning Roth conversions or IRA withdrawals. Permanent rates remove the 2026 rate cliff. | Standard deduction $16,100 single, $32,200 joint, $24,150 head of household. The 37% rate starts at $640,600 single and $768,700 joint. | Indexed for inflation. IRS publishes these in late 2026. |
| Charitable deduction changes | Three changes for individuals: a deduction of up to $1,000 ($2,000 joint) of cash gifts for people who take the standard deduction; a floor so itemizers deduct only gifts above 0.5% of their contribution base (generally AGI); and, for the 37% bracket, a 2/37 haircut on itemized deductions that caps their value at about 35 cents per dollar. | Tax years beginning after December 31, 2025; no end date | Retirees who give. Most retirees take the standard deduction and can now deduct up to $1,000 ($2,000 joint) of cash gifts. | All three rules apply for the first time. Gifts to donor-advised funds and supporting organizations do not count toward the non-itemizer deduction. | Same rules. A new federal scholarship tax credit of up to $1,700 for gifts to scholarship granting organizations starts January 1, 2027, in participating states. |
| SALT deduction cap | The itemized cap on state and local taxes rose from $10,000 to $40,000 ($20,000 married filing separately). It shrinks by 30% of modified AGI above $500,000, but never below $10,000. Entity-level PTET elections were left in place. | Tax years 2025 through 2029; drops back to $10,000 in 2030 | Retirees who itemize because of property tax and state income tax, mostly in high-tax states. | Cap $40,400. Phasedown starts at $505,000 of MAGI, and the cap reaches the $10,000 floor at about $606,333. | By statute, 101% of the 2026 amounts: about $40,804 cap and a $510,050 threshold. IRS confirms in late 2026. |
| Estate and gift tax exemption | Instead of falling to roughly half in 2026, the basic exclusion was set at $15,000,000 per person and made permanent, with inflation indexing after 2026. The GST exemption matches it. | Deaths and gifts after December 31, 2025 | Retirees with estates near or above $15,000,000 per person, and anyone making annual gifts to family. | $15,000,000 per person ($30,000,000 per married couple with portability). Annual gift exclusion $19,000 per recipient. | Indexed from $15,000,000. IRS publishes these in late 2026. |
| Trump accounts | A new tax-advantaged account for children under 18. Children who are U.S. citizens born from 2025 through 2028 can receive a one-time $1,000 federal deposit. Contributions from family and employers are capped at $5,000 a year combined, and up to $2,500 of that can come from an employer tax-free to the employee. | Accounts opened starting in 2026; contributions began July 4, 2026 | Grandparents who want to contribute for grandchildren, within the $5,000 per child annual cap. | First contribution year. $5,000 annual limit; $2,500 employer exclusion. | Same $5,000 limit (indexing starts after 2027). |
| Car loan interest deduction | Up to $10,000 a year of interest on a loan for a new personal-use vehicle with final assembly in the United States, loan taken out after 2024. Phases out by $200 per $1,000 of MAGI above $100,000 ($200,000 joint). The VIN goes on the return. | Tax years 2025 through 2028 | Retirees financing a new U.S.-assembled car with MAGI under $100,000 single or $200,000 joint. | Same $10,000 limit and thresholds. | Same rules, not indexed. Ends after 2028. |
| Clean energy credits ended early | Several credits end years ahead of schedule: the new and used EV credits after September 30, 2025; the home efficiency and residential solar credits after 2025; the new energy-efficient home credit (45L) for homes acquired after June 30, 2026; and the 179D commercial building deduction for construction beginning after June 30, 2026. | Dates vary by credit, September 30, 2025 through June 30, 2026 | Homeowners who planned solar, heat pumps, windows or other efficiency projects. Those credits ended after 2025. | 45L and 179D still available for qualifying homes acquired, or construction begun, by June 30, 2026. | Gone, apart from projects grandfathered under the begin-construction rules. |
| Mortgage interest | The $750,000 acquisition debt limit became permanent, and home equity interest stays nondeductible unless the loan buys, builds, or improves the home. Mortgage insurance premiums are deductible as interest again. | Permanent; mortgage insurance from tax years beginning after December 31, 2025 | Retirees still paying a mortgage and itemizing. | $750,000 limit; mortgage insurance premiums count as interest for itemizers. | Same rules. |
Worked example (hypothetical, illustrative round numbers)
A retired couple weighing a $10,000 Roth conversion in 2026
A married couple, both over 65, file jointly for 2026. Pensions, IRA withdrawals and the taxable part of Social Security put their MAGI at $170,000. Their Social Security is already at the 85% taxable maximum, so extra income does not change that part. They take the standard deduction.
Each spouse's $6,000 senior deduction shrinks by 6% of MAGI above $150,000.
- 2026 standard deduction, joint
- $32,200
- Age-65 additional standard deduction ($1,650 each)
- $3,300
- Senior deduction at $170,000 MAGI: 2 x ($6,000 minus 6% of $20,000)
- $9,600
- Total deductions
- $45,100
- Senior deduction after a $10,000 conversion (MAGI $180,000)
- $8,400
- Taxable income added by the $10,000 conversion
- $11,200
- Federal tax on the conversion at the 22% bracket
- about $2,460 (24.6% effective)
Inside the phaseout, each $1,000 of extra income also removes $120 of senior deduction for a couple who both qualify, so a 22% bracket behaves like about 24.6%. The deduction is fully gone at $250,000 joint ($175,000 single). Above that, a conversion is taxed at the bracket rate alone.
Because the senior deduction ends after 2028 and brackets are now permanent, the comparison is no longer “convert before rates rise in 2026”. It is your rate now versus your expected rate later. See our Roth conversion guide.
Illustrative only. Real results depend on your full return, state rules, and facts this example leaves out. It is not a promise of any tax outcome.
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The $6,000 Senior Deduction
What it is, who gets it, and what it is not
For tax years 2025 through 2028, each taxpayer who is 65 or older by the end of the year can deduct an extra $6,000, or $12,000 for a married couple who both qualify. It is claimed whether you itemize or take the standard deduction, and it stacks on top of the existing age-65 add-on to the standard deduction ($2,050 single or $1,650 per married person in 2026).
Each $6,000 shrinks by 6% of modified AGI over $75,000 single or $150,000 joint. You need a valid Social Security number on the return, and married couples must file jointly; married filing separately gets no senior deduction.
What it is not: the law did not make Social Security benefits tax-free. Up to 85% of benefits can still be taxable under the same formula as before. The senior deduction simply lowers taxable income, which offsets some or all of the tax on benefits for many retirees. Our Social Security taxation guide explains the formula, and the senior deduction page has the phaseout chart.
Roth Conversions and IRA Withdrawals Under Permanent Rates
The 2026 deadline is gone; a 2028 window replaced it
Before the 2025 law, many pre-retirees planned to convert or withdraw before the brackets reverted in 2026. That deadline no longer exists. The 12%, 22% and 24% brackets are permanent and indexed, and the 2026 joint 22% bracket runs from $100,800 to $211,400 of taxable income.
The new wrinkle is the senior deduction phaseout from 2025 through 2028. Conversion income in the phaseout range costs a little more than the bracket rate, as the worked example shows. After 2028, the deduction ends, so the same income may be taxed at the plain bracket rate on a smaller deduction base. Required minimum distribution ages were not changed by the 2025 law.
Charitable Giving for Retirees From 2026
A deduction for non-itemizers, and why QCDs still lead
Starting in 2026, people who take the standard deduction can deduct up to $1,000 ($2,000 joint) of cash gifts to public charities. Gifts to donor-advised funds and supporting organizations do not count. For itemizers, gifts count only above 0.5% of the contribution base, generally AGI.
For retirees 70½ or older with IRAs, qualified charitable distributions are still usually the most efficient way to give. A QCD is excluded from income entirely, so it is not touched by the new floor, it counts toward required minimum distributions once those begin, and because it lowers AGI it can also reduce the senior deduction phaseout and the taxable share of Social Security.
Your Home: SALT, Mortgage Interest and Energy Credits
Bigger itemized deductions for some, lost credits for others
If property tax and state income tax push you into itemizing, the 2026 SALT cap is $40,400, with the phasedown starting at $505,000 of MAGI, which few retirees reach. Mortgage interest on up to $750,000 of acquisition debt stays deductible, and mortgage insurance premiums count as interest again from 2026.
Two home credits ended early. The energy efficient home improvement credit (windows, doors, heat pumps, insulation) and the residential clean energy credit (solar, battery storage, geothermal) do not apply to property placed in service or expenditures made after December 31, 2025. Projects finished in 2026 do not qualify.
Estate Planning, Gifts and Grandchildren
A permanent $15 million exemption changes the urgency
The estate and gift exemption is $15,000,000 per person in 2026, indexed after that, and $30,000,000 for a married couple using portability. The old law would have roughly halved it in 2026. For most families, the bigger planning issue is now income tax: assets held until death get a stepped-up basis, while assets given during life carry over your basis. See our estate tax exemption guide.
The annual gift exclusion is $19,000 per recipient in 2026. Grandparents can contribute to a grandchild's Trump account, but all family and employer contributions share one $5,000 annual cap per child, and 529 plans can now cover up to $20,000 a year of K-12 costs. Details on our Trump accounts page.
What Is Scheduled for 2027 and 2028
The senior deduction has two more years after 2026
In 2027 the senior deduction stays at $6,000 per person with the same $75,000 and $150,000 thresholds, which are not indexed. The standard deduction, the age-65 add-on and the brackets are indexed. IRS publishes these in late 2026.
The senior deduction and the car loan interest deduction end after 2028. The SALT cap rises 1% a year through 2029 and returns to $10,000 in 2030. A federal scholarship tax credit of up to $1,700 for gifts to scholarship granting organizations begins January 1, 2027, in participating states.
Frequently Asked Questions
Retirees: common questions
Did the 2025 tax law make Social Security tax-free?
No. Up to 85% of Social Security benefits can still be taxable under the same formula as before. The law added a separate $6,000 deduction for people 65 and older for 2025 through 2028, which lowers taxable income and offsets some of the tax on benefits.
Who qualifies for the $6,000 senior deduction?
Anyone age 65 or older by the end of the tax year who has a valid Social Security number, for tax years 2025 through 2028. Married couples must file jointly, and each qualifying spouse gets $6,000. It applies whether you itemize or take the standard deduction.
At what income does the senior deduction disappear?
Each $6,000 is reduced by 6% of modified AGI over $75,000 single or $150,000 joint. A single filer loses it entirely at $175,000; a married couple who both qualify lose it entirely at $250,000.
Can I take the senior deduction and the age-65 standard deduction add-on?
Yes. The senior deduction is in addition to the existing extra standard deduction for age 65, which is $2,050 for single filers and $1,650 per qualifying married person in 2026.
Can retirees who take the standard deduction deduct charitable gifts in 2026?
Yes, up to $1,000 single or $2,000 joint of cash gifts to qualifying public charities, starting in 2026. Gifts to donor-advised funds do not count. Qualified charitable distributions from an IRA remain a separate option for people 70 and a half or older.
What changes for retirees in 2027 and after 2028?
In 2027 the senior deduction continues unchanged, and indexed amounts like the standard deduction will be published by the IRS in late 2026. The senior deduction ends after 2028 unless Congress extends it.
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Authoritative Sources
- Public Law 119-21 (H.R. 1, 119th Congress), enrolled text on Congress.gov
- IRS: One, Big, Beautiful Bill provisions
- IRS Rev. Proc. 2025-32: 2026 inflation adjustments
- IRC Section 151(d)(5)(C): temporary senior deduction
- IRS: Tax deductions for working Americans and seniors (tips, overtime, car loan interest, seniors)
- IRC Section 170: charitable contributions, including the 0.5% floor in 170(b)(1)(I)
- IRS: Trump accounts
Citations reflect U.S. federal tax law as of the article's last reviewed date.