The Big Beautiful Bill and Retirement Planning: Senior Bonus Deduction

With more than 800 pages, the Big Beautiful Bill (BBB) can seem overwhelming. In this blog series, we break down specific segments focused on retirement planning and how they affect your clients. If a topic piques your interest, consider researching it further or reaching out to our team to talk strategy.

First up: The Senior Bonus Deduction.

What is the Senior Bonus Deduction?

A temporary tax deduction available to eligible American taxpayers who are 65 and older. It is included as part of the One Big Beautiful Bill Act signed into law by President Trump in July 2025.

Key Info

• Individuals aged 65 or older with a modified adjusted gross income (MAGI) of up to $75,000 (single filers) or $150,000 (married filing jointly) are eligible for the full deduction
• Up to $6,000 per eligible individual, or $12,000 for married couples filing jointly if both spouses qualify
• This deduction supplements, but does not replace, the existing additional standard deduction already available to older adults

Implications for Retirement Income Planning

The Senior Bonus Deduction creates a four-year sprint for financial professionals to make meaningful impacts in the probability of success in retirement incomes and wealth transfers. There are several opportunities to act upon immediately helping clients and position:

1. Work with the client’s account to re-run 2025 tax projections. Look for alternatives that further reduce taxable income for seniors. Those individuals and couples that are close to the provisional limits should be prioritized. Review all Modified Adjusted Gross Income levels that might impact the provisional income on Social Security.
2. Roth conversions may be more important during the four-year period with reduced taxation. The additional deduction, along with the tax savings created on Social Security, might allow for larger Roth conversions. The conversion might be minimal taxation for more qualified dollars becoming tax free later or during wealth transitions.
3. Timing of withdrawals will be critical to maximize the deduction limits. Re-evaluate income sources like annuities with riders, IRA required minimum distributions and other taxable income.
4. Look at this opportunity to blend taxable and non-reportable income sources in the future. The impact will be to lower IRMAA and save money on Medicare premiums.
5. Look to delay Social Security until age 70 to maximize the benefit but also reduce provisional income for a spouse’s benefit.

Each client situation is unique and requires thought and technical guidance from a team of experts such as attorneys, CPAs, planners and insurance agents. However, whenever such a significant piece of legislation is enacted, clients will look to their financial professional for ideas and strategies to make sense of a complicated bill.

What now?

The effects of the Senior Bonus Deduction will marginally affect the funding because current taxation makes up 4% of the overall funding. Many have talked about the deductions and tax revenue reductions on overtime wages and tips. Both wages and tips will remain taxable as a payroll tax; however, the overall general fund tax revenue will decrease.

For planning purposes, you should have a short-term focus (less than 2028) when making decisions around this bill. There are no offsetting revenue requirements; therefore, there is a strong chance that these deductions and temporary income tax reliefs will be adjusted or removed during the next election cycle.