According to the “Big and Beautiful Act” (OBBBA) signed by President Trump on the American National Day, taxpayers aged 65 and above are entitled to a new senior tax exemption of $6,000. Married couples where both spouses are aged 65 and above can deduct $12,000 when filing taxes jointly.
This deduction is applicable to taxpayers who apply for the “standard deduction”, as well as taxpayers who itemize deductions on Form 1040 or Schedule A of Form 1040-SR. It is expected that the Internal Revenue Service (IRS) will include a line for this new senior deduction on the 2025 Form 1040, following the line for the standard deduction, or include it on Schedule 1 of the Form 1040.
Taxpayers aged 65 and above who do not receive Social Security benefits can also claim the $6,000 senior deduction on the 2025 Form 1040, regardless of whether they receive Social Security benefits or not.
It is important to note that the so-called “Modified Adjusted Gross Income” (Modified AGI) is commonly used by the IRS to determine whether taxpayers qualify for certain tax breaks or reductions, or whether they owe additional taxes or fees.
Due to the complexity of federal tax laws, the definition of Modified AGI may vary depending on its purpose. When calculating Modified AGI, one starts with the AGI on line 11 of Form 1040, and then adds any foreign income exclusion, foreign housing exclusion, and any amounts excluded from total income due to income from Puerto Rico or American Samoa.
Some people mistakenly believe that the “Big and Beautiful Act” eliminates federal income tax on Social Security benefits. In reality, the act does not make Social Security benefits completely tax-free. Many Social Security recipients currently have to pay up to 85% of federal income tax on their benefits, depending on their provisional income. While President Trump had promised to end this tax, Republicans found another way to reduce taxes for seniors to pass the bill, bypassing the Senate’s 60-vote filibuster rule that prevented changes to income tax on Social Security benefits.
(Reference: MSN report)