If you’re age 65 or older, you may be in a prime position to leverage a pretty significant tax-break: the new senior bonus tax deduction. Thanks to the One Big Beautiful Bill Act (OBBB) — signed into law in 2025 — eligible seniors can claim up to $6,000 in extra deduction (or $12,000 for a married couple if both spouses qualify) for tax years 2025–2028
Here are five smart strategies to cash in on this deduction — and some things to watch as you plan your retirement-tax strategy.
1. Use the extra deduction to make Roth conversions more tax-friendly
One of the often-overlooked benefits of the senior bonus deduction is how it can lower your taxable income, which in turn reduces the tax hit associated with converting funds from a traditional IRA to a Roth IRA.
- When you convert a traditional IRA → Roth IRA, the converted amount adds to your taxable income in the year of conversion.
- If you’re age 65+ and eligible for the senior bonus, you get an additional deduction (up to $6,000 solo / $12,000 married filing jointly) that reduces your taxable income under “below-the-line” deduction rules.
- For example, we recently showed a 65+ married couple who was filing jointly how they can combine the standard deduction + senior bonus and still stay within the 12% tax bracket for some Roth conversions.
- Strategy tip: If you’re planning a conversion over the 2025-2028 window, consider spreading conversions across years to take full advantage of the extra deduction each year.
Bottom line: The deduction gives you more “tax cushion” to convert more comfortably without leaping into a higher tax bracket.
2. Reduce tax on Required Minimum Distributions (RMDs) by lowering taxable income
Once you reach the RMD age (which for many now is 73+ depending on your birth year), you’ll be required to withdraw a certain amount each year from your retirement accounts and pay tax on it (if applicable). But here’s how the senior bonus helps:
- Even though the deduction does not reduce your adjusted gross income (AGI), it does reduce your taxable income — which means the tax you owe on RMDs (and other income) goes down.
- For example: If you’re 65+ this year and your income is under the threshold, you can subtract the $6,000 (or $12,000) from your taxable income, making your RMD less “tax-likely” to push you into a higher bracket.
Bottom line: Think of the extra deduction as a way to create “headroom” against RMD-tax hits.
3. Maximize even if you itemize — not just if you’re taking the standard deduction
One of the unique aspects of the senior bonus deduction: it is available even if you itemize your deductions. That’s a key detail.
- Most supplemental “senior” deductions previously only applied if you took the standard deduction. The senior bonus is additive and applies regardless.
- If you live in a high-tax state (with large property tax, state income tax, SALT limitations, etc.), and you itemize anyway, this deduction gives you a further reduction beyond typical standard deduction strategies.
- For example, homeowners age 65+ in high-tax areas can combine their large itemized deductions ( mortgage interest, real estate tax, SALT up to the cap) plus this extra deduction, thereby reducing taxable income even more.
Bottom line: Don’t assume itemizers miss out — this deduction works for you too.
4. Time asset sales / capital gains to stay within favorable tax brackets
If you’re planning to sell an appreciated asset — stocks, a business interest, property (beyond your home), etc. — your taxable income is a key factor in determining the tax rate on your capital gains. The senior extra deduction gives you a little extra margin.
- For example: The 0% long-term capital gains rate kicks in for married joint filers at taxable income thresholds (in 2025, roughly $96,700 for married filing jointly) and about $48,350 for singles.
- If you’re age 65+, eligible, and your income is near those thresholds, adding the senior bonus deduction can reduce your taxable income and potentially keep you below the threshold so that capital gains get taxed at 0%.
- Strategy tip: If you’re planning a sale, consider doing it in a year with lower other income (e.g., fewer withdrawals, lower RMDs, less w-2 income) so you benefit more from the deduction.
Bottom line: Use the deduction as part of your timing strategy for major asset sales to reduce or eliminate capital gains tax.
5. Use it when downsizing or selling a home with large appreciation
Many seniors own homes that have appreciated significantly over decades. While the home-sale exclusion is generous ($250,000 single / $500,000 married jointly), some homeowners exceed those amounts — or their other income pushes them into tax brackets where the net effect is less favorable. The senior bonus deduction can help.
- Example: Suppose you’re age 65+ and you sell a home. You exclude up to $500K (if married joint) of gain if you meet the ownership/use tests. But say your total taxable income is high enough that the remaining gain is taxable, or your other income taxes you at a higher bracket.
- By “dropping” up to $12,000 in taxable income (for a couple), you may reduce or eliminate the additional tax liability triggered by the home sale.
- Key: Because the senior bonus is available only from 2025 through 2028, if you’re planning to sell your home in that timeframe, you might time it to maximize this deduction. If you wait until after 2028 (assuming it expires), you lose the extra cushion.
Bottom line: If you’re selling the family home or downsizing in the near term and are age 65+, this deduction is another tool to help optimize outcomes.
Important eligibility & timing details to remember
To make sure you get the full benefit, keep the following in mind:
- Age requirement: The taxpayer (and spouse, if married filing jointly and both claim) must be age 65 or older on or before the last day of the tax year.
- Income thresholds & phase-out:
- For a single filer, the full $6,000 deduction is available if modified adjusted gross income (MAGI) is $75,000 or less.
- For married filing jointly, full benefit if MAGI is $150,000 or less.
- The deduction phases out for incomes above those levels — completely gone at $175,000 (single) or $250,000 (married joint).
- Effective years: The deduction is in effect tax years 2025 through 2028, unless future legislation extends it.
- Does not reduce AGI: This deduction is a “below-the-line” deduction (adjusts taxable income, not AGI). This means it does not affect certain thresholds (for example, Social Security taxation thresholds) that are based on AGI or provisional income.
- Available whether standard or itemizing: Unlike some senior deductions, this one applies even if you itemize deductions.
Final thoughts
If you’re 65 or older (or will be soon) and expect to have taxable income in 2025-2028, you’re in a very promising position to strategically use the up-to-$6,000 (or $12,000 if married and eligible) deduction. But the key is planning:
- Review upcoming income: Will you have large RMDs, conversions, asset sales?
- Check your filing status and modified AGI levels to see whether you qualify for full deduction (and whether you’re near the phase-out).
- Map out timing: Because this is temporary (2025-2028), you may want to do major moves (home sale, Roth conversions, etc.) during this window.
- Coordinate with your tax advisor: Because the deduction doesn’t affect AGI, but affects taxable income, you’ll want to understand how it interacts with your other tax planning (Social Security taxation, Medicare IRMAA surcharges, capital gains, etc.). Request a FREE “found money” tax report.
- Don’t assume you’ll get the full $6,000 automatically — the MAGI thresholds matter and your income year by year can shift benefit levels.
By thinking ahead, you can turn what looks like a simple deduction into a meaningful tax-saving lever in your retirement years.
Note: The information above is for educational purposes only and does not constitute tax or financial advice. Always consult with a qualified tax professional about your personal situation.