Maximizing the New Senior Tax Deduction: Strategies for 2025–2028

| Concentric Wealth Management Investment Committee

by Dean Johns

As part of the 2025 tax legislation, a potential enhanced deduction for seniors was introduced for individuals who are at least age 65 by the end of the tax year. This $6,000 per-person deduction effectively served as a substitute for the proposed elimination of taxes on Social Security benefits, which was not included in the final bill.

Here are several key points regarding this new deduction:

  • Available to single and married filers age 65 and older, but not to those filing as married filing separately. 
  • The deduction begins to phase out for single filers with Modified Adjusted Gross Income (MAGI) above $75,000 and is fully phased out at $175,000. For joint filers, the phase-out range is $150,000 to $250,000. 
  • Taxpayers may claim the deduction regardless of whether they itemize or take the standard deduction. 
  • The deduction is in addition to the existing additional deduction for individuals aged 65 or older or who are visually impaired. However, unlike the enhanced senior deduction, the existing additional deduction does not apply if the taxpayer itemizes. 
  • When combined with the standard deduction and the existing age 65 additional deduction, the maximum total deduction for married couples in 2026 could reach $47,500. 
  • This maximum deduction may offset most, if not all, of a married couple’s Social Security benefits. 
  • The enhanced senior deduction applies only to tax years 2025 through 2028. 
  • Taxpayers should consider planning strategies to take full advantage of this temporary opportunity. 

Maximizing the additional $6,000 (single) or $12,000 (joint) deduction may require proactive tax planning throughout the year, not just at year-end.

Consider the following example:

  • Married couple, both over age 65 
  • Typically withdraw $10,000 per month from traditional IRAs 
  • Receive taxable Social Security benefits totaling $50,000 annually 

Without proactive tax planning, total MAGI would be $170,000, reducing the enhanced senior deduction from $12,000 to $9,600. This effectively results in the last $20,000 of income generating $22,400 of taxable income.

One potential strategy would be to adjust withdrawals to $8,000 per month from traditional IRAs and $2,000 per month from Roth IRAs. This approach could reduce MAGI below $150,000 and preserve the full $12,000 deduction.

This example also highlights the importance of maintaining multiple “tax buckets” in retirement to provide flexibility in managing income and tax exposure. Relying solely on traditional IRAs may limit planning opportunities and reduce the ability to optimize deductions, such as the enhanced senior deduction.

As with any tax strategy, individual circumstances vary. Taxpayers should consult with their financial advisor or tax professional to evaluate appropriate planning strategies for their specific situation.