After the passing of the “One Big Beautiful Bill Act” (OBBBA) in 2025, retirees have found that various changes have occurred ranging from state and local tax deductions to Roth Conversion Strategies. They now need to adhere to new phaseouts and adjustments in deductions.
Tax expert and partner at Keebler and Associates, Bob Keebler, reminds people that while some changes bring significant opportunities, there are also pitfalls that if mishandled, could cost retirees thousands of dollars.
In a recent episode of the “Decoding Retirement” podcast, Keebler emphasized that this comprehensive legislation is not just about tax rate adjustments, but also covers phaseouts, deductions, and strategic planning opportunities. Taxpayers are advised to closely coordinate with qualified tax professionals.
Keebler described the situation as “pulling one lever affects another,” stressing the importance of strictly following procedures and using professional software for calculations rather than relying on Excel spreadsheets, as they may not capture all nuances.
The State and Local Tax (SALT) deduction allows taxpayers to deduct specific state and local taxes from their federal taxable income, provided they itemize deductions rather than opt for the standard deduction.
Under the OBBBA, the cap on SALT deductions has increased from $10,000 last year to $40,000 this year.
Keebler pointed out, “You shouldn’t deduct $60,000 this year and only $20,000 next year. If local regulations allow, it’s wise to defer the portion exceeding $40,000 to the following year.”
Keebler recommended that most retirees consider adopting a concentrated strategy of itemized deductions since the standard deduction is tied to inflation, which is expected to reach historical highs.
He suggested, “Many individuals should still consider itemizing deductions every two to three years.”
The phaseouts for high-income earners are more complex. When income exceeds $500,000, the $40,000 tax-free threshold gradually reduces, dropping back to $10,000 when income reaches $600,000.
Keebler explained, “When Adjusted Gross Income (AGI) increases from $500,000 to $600,000, actual income increases by $130,000 due to losing a $30,000 deduction. In such cases, efforts should be made to keep income below $500,000.”
He pointed out that charitable donations are a lever retirees can easily control. He suggested making significant donations to a Donor-Advised Fund in the first year, distributing charitable funds through the fund in the second and third years, and repeating this process in the fourth year.
Although Roth conversions remain an effective strategy under the new permanent tax rates, Keebler cautioned that their complexity has significantly increased due to multiple nested phaseout mechanisms within the legislation.
He recommended using Roth conversion plans to test each component of the phaseouts to assess their impact on other aspects of tax reporting.
Keebler advised, “Testing should be done incrementally, for example, when converting $20,000, ask: How will my state tax deduction change? Will the Senior Deduction be affected? Will this $20,000 impact IRMAA premiums?”
Income-Related Monthly Adjustment Amount (IRMAA) is an additional fee applied to the standard monthly premiums of Medicare Part B and Prescription Drug Part D. It applies to high-income beneficiaries, with the amount calculated based on the modified adjusted gross income (MAGI) from the past two years of tax filing. IRMAA amounts vary with income levels, with higher-income individuals required to pay higher additional fees.