Understanding the New Senior Deduction: Who Qualifies and How to Maximize It

The Big Beautiful Bill created a valuable new benefit for seniors: a $6,000 above-the-line deduction for taxpayers age 65 or older. Available through 2028, this deduction reduces adjusted gross income (AGI), increasing eligibility for other tax benefits like medical expense deductions, IRA contributions, and premium tax credits.

Eligibility Requirements

• Must be age 65 or older by December 31 of the tax year

• Deduction begins to phase out at $75,000 MAGI (single) or $150,000 MAGI (joint)

• Reduction is 6% for every dollar above the threshold

Example for Joint Filers:

• $150,000 MAGI = $6,000 deduction

• $175,000 MAGI = $4,500 deduction

• $200,000 MAGI = $3,000 deduction

• $225,000 MAGI = $1,500 deduction

• $250,000 MAGI = $0 deduction

Planning Opportunities

1. Time Income Over Multiple Years
If you're planning to sell a rental property or take a large IRA distribution, consider spreading it over two tax years to stay under the MAGI phase-out thresholds.

2. Use Deductible Retirement Contributions
Contributing to a SEP IRA or Solo 401(k) can reduce MAGI. If you're self-employed, these pre-tax contributions are powerful tools to preserve your senior deduction.

3. Coordinate With Other Benefits
Reducing AGI via this deduction may also reduce Medicare premium surcharges (IRMAA) and increase eligibility for other above-the-line deductions. We can layer these strategies for cumulative benefit.

4. Leverage Charitable Strategies
If you’re over 70½, Qualified Charitable Distributions (QCDs) from IRAs don’t count toward MAGI. This helps preserve the deduction while fulfilling charitable goals.

Schedule a retirement tax strategy session today to build a multi-year plan around this deduction while it lasts.