New $6,000 Senior Deduction Offers 'Incredible, Valuable Opportunity,' CPA Says: How to Make the Most of It

Tax changes taking effect in 2026 are creating new financial planning avenues for individuals aged 65 and over. A significant development is a new temporary "bonus" or senior deduction of up to $6,000 per qualifying individual, enacted as part of a tax package signed into law last July. Married couples filing jointly could potentially benefit from a combined deduction of up to $12,000.

The $6,000 senior deduction is applicable for tax years 2025 through 2028. It benefits taxpayers aged 65 and older, irrespective of whether they choose to itemize deductions or take the standard deduction.

Experts suggest that retirees may not have fully utilized this tax break since its implementation partway through last year. However, the planning opportunities over the next three years are crucial.

"This three-year window is an incredible, valuable opportunity," stated Miklos Ringbauer, a CPA and founder of MiklosCPA Inc. "It's three times $12,000, plus adjusted for inflation. That's a lot of savings that we can build in for further down the road."

The deduction aims to lower, or potentially eliminate, the tax liability for eligible seniors. It's important to note that this is a deduction, not a tax credit, meaning it won't necessarily result in a refund of the deducted amount.

The potential impact of this deduction is significant, according to Bill Sweeney, senior vice president of government affairs at AARP. The Council of Economic Advisers estimates that approximately 33.9 million seniors may qualify for this new deduction, leading to an average increase of $670 in after-tax income per eligible taxpayer.

"That's four years of immediate relief at a time when older Americans are facing really high costs," Sweeney remarked.

To qualify for the full deduction, seniors must meet certain modified adjusted gross income (MAGI) thresholds: under $75,000 if single, or under $150,000 if married and filing jointly. The deduction is phased out for incomes exceeding these thresholds and completely phases out for individuals earning $175,000 or more and married couples earning $250,000 or more.

While former President Trump had proposed eliminating taxes on Social Security benefits, the legislative process (reconciliation) prevented a direct change. This new senior deduction is intended to offset the income that federal taxes on Social Security benefits might otherwise reduce.

Existing federal taxes on Social Security benefits are calculated based on "combined income"—adjusted gross income plus nontaxable interest plus half of Social Security benefits. Up to 50% of benefits are taxable for individuals with a combined income between $25,000 and $34,000 (and $32,000 to $44,000 for married couples). Up to 85% are taxable for incomes exceeding $34,000 ($44,000 for married couples).

The recent tax legislation includes other benefits for those 65 and older, such as a higher standard deduction, state and local tax deductions, a deduction of up to $10,000 for new auto loan interest, and tax-free treatment of tips or overtime pay for those still working.

"With tax changes come tax planning opportunities," noted Joe Elsasser, a certified financial planner and president of Covisum. He highlighted that the new $6,000 senior deduction applies regardless of whether Social Security benefits have been claimed.

Elsasser advises, "Don't just focus on the temporary additional senior deduction as a reduction of Social Security tax. Instead, think of it as a four-year additional deduction that could be applied against any kind of income."

The deduction became effective for the 2025 tax year. However, some individuals may not have factored this new deduction into their 2025 taxable income calculations, according to Ringbauer. For instance, a highly successful year in the stock market in 2025 could push some seniors over the income limits, causing them to miss out on the full deduction.

For the 2026 tax year and beyond, older individuals should prioritize strategies to remain within the deduction's income limits.

Seniors who are still employed can potentially reduce their taxable income by contributing to retirement plans. In 2026, individuals aged 50 and older can contribute up to $32,500 to a 401(k), including catch-up contributions. Those aged 60 to 63 may be able to set aside up to $35,750 with super catch-up contributions.

Charitable contributions are another avenue for older taxpayers to consider for reducing taxable income.

Individuals aged 65 and older should also be mindful of other potential income sources, such as required minimum distributions (RMDs) or Roth conversions, which could impact their taxable income and, consequently, their eligibility for the senior deduction, Ringbauer advised.

The new senior deduction can reduce taxes on various income types, not just Social Security, Elsasser pointed out. This suggests that for those with financial flexibility, it might be advantageous to withdraw funds from IRAs or other retirement accounts while the temporary deduction is in place. Such withdrawals could also help lower future RMDs, thereby reducing future taxable income.

Furthermore, this strategy could enable individuals aged 65 and over to delay claiming their Social Security retirement benefits. Delaying Social Security offers a guaranteed annual return of 8% from their full retirement age, a significant benefit.