The One Big Beautiful Bill Act (OBBBA) made sweeping changes to the tax code, including the introduction of a new, temporary tax deduction for seniors. The effort to create a new tax break for seniors was originally conceived of as “no taxes on Social Security” during the 2024 presidential campaign. Instead, policymakers adopted a broader approach in the form of a new senior deduction, that is projected to cost $90.8 billion over four years, contributing to OBBBA’s total deficit increase of $4.1 trillion over ten years, including interest costs.
What Is the Senior Deduction?
The new senior deduction allows seniors to deduct from taxable income, up to $6,000 individually or $12,000 if married filing jointly. To qualify, filers must provide their Social Security number on their tax return and be at least 65 years old. The deduction phases out for taxpayers with income over $75,000 ($150,000 for joint filers).
Filers can claim the senior deduction in addition to the standard deduction, which was extended and increased under the OBBBA. The standard deduction allows filers who do not itemize to deduct up to $15,750 from their taxable income in 2025. Seniors at all income levels also qualify for the additional standard deduction which allows filers to deduct $2,000 in 2025 ($1,600 per person for married filing jointly). The new senior deduction stacks on top of these pre-existing tax breaks and adds complexity to the tax code.
The Senior Deduction Will Reduce Federal Revenues
According to the Joint Committee on Taxation, the provision will reduce federal revenues — and therefore raise deficits — by $91 billion over the next 4 years. The deduction is set to expire in 2028. If Congress chooses to extend the provision, the cost could double, reaching $220 billion by 2034.
Most Seniors Will Receive Little to No Benefit
According to the Tax Policy Center, fewer than half of older adults will benefit from the new senior deduction. The lowest-income seniors receive no benefit because their taxable income is typically less than the standard deduction and preexisting senior deduction they already claim, meaning they have no additional tax liability to reduce. Similarly, the highest-income seniors — those in the top 20 percent — receive little benefit due to the phase-out that begins at $75,000 of modified adjusted gross income.
The deduction primarily benefits middle and upper-middle income seniors, with 77 percent of total benefits accruing to those two income groups. The middle-income seniors are projected to receive an average tax cut of $220 (0.30 percent of income) in 2026 while upper-middle income seniors are projected to receive the largest average benefit of $300 (0.20 percent of income) in 2026.
Conclusion
The new senior deduction is projected to increase our already dangerously unsustainable national debt — and could cost even more if extended beyond its 2028 expiration date. The provision adds new complexity to the tax code for seniors who must navigate income phase-outs and eligibility requirements, while fewer than half will benefit at all. As a temporary measure set to expire in 2028, it also creates uncertainty about future tax planning for retirees. Looking ahead, policymakers should prioritize fiscally responsible tax reforms that improve our debt outlook while making the code simpler, fairer, and more supportive of economic growth.
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Further Reading
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The terms “budget deficit” and “trade deficit” can be conflated, but they are distinct measurements of important fiscal and economic concepts.
The Federal Government Has Borrowed Trillions. Who Owns All that Debt?
Most federal debt is owed to domestic holders, but foreign ownership is much higher now than it was about 50 years ago.
What Are Estate and Gift Taxes and How Do They Work?
Estate and gift taxes produce relatively lower revenue compared to other sources, but they generate a significant amount of attention, and even controversy.