The One Big Beautiful Bill Just Became Law

What Retirees Should Know

On July 4, 2025, President Trump signed a sweeping tax package into law — officially titled the American Tax Relief for Seniors Act, but often referred to as the One Big Beautiful Bill.
This new law brings meaningful changes for retirees, especially those living on fixed incomes, drawing from retirement accounts, or relying on Social Security.

If you’re retired or planning to retire soon, here’s a breakdown of what’s in the bill and how it could affect your taxes and planning over the next few years.

1. A New $6,000 Senior Deduction

One of the headline provisions is a new deduction of $6,000 for taxpayers aged 65 and older.
If you’re married and both spouses are over 65, that becomes $12,000.

How it works:

• This is on top of the existing standard deduction
• It begins in tax year 2025
• It phases out for higher earners:
  • Phase-out begins at $75,000 (single) or $150,000 (married)
  • Fully phased out by $100,000 (single) or $200,000 (married)
• The deduction is temporary, expiring after 2028

This could make a noticeable difference for middle-income retirees — especially those pulling from IRAs or taxable investment accounts.

2. More Social Security Income Will Be Tax-Free

Contrary to some public claims, the bill does not eliminate federal taxes on Social Security income. As described above, there is an additional $6k senior deduction that can reduce your taxable income, and in some cases, bring your provisional income below certain thresholds that would decrease the amount of your Social Security income that is taxable. 

Impact:
The number of retirees who owe zero federal tax on their Social Security is expected to jump from around 64 percent to nearly 88 percent, according to government estimates.

For many retirees, this means:

• More money stays in your pocket each month
• Less worry about unexpected tax bills or withholding shortfalls
• Greater simplicity when filing your return

3. Extension of 2017 Tax Cuts

The bill makes permanent several key provisions from the 2017 Tax Cuts and Jobs Act (which were set to expire in 2026), including:

• Lower income tax brackets
• Higher standard deduction
• More favorable treatment of pass-through business income
• Expanded 0 percent long-term capital gains threshold

For retirees who:

• Are selling appreciated investments
• Draw income from business ventures or rentals
• Convert traditional IRA funds to Roth
• Are tax-managing distributions in retirement

…this extension provides much more stability and predictability in long-term planning.

4. What This Means for Medicare Surcharges (IRMAA)

The new deduction can also help some retirees avoid higher Medicare premiums.

IRMAA surcharges are based on modified adjusted gross income (MAGI), and this new $6,000 deduction lowers that number — potentially keeping you below IRMAA thresholds.

For example:

• A married couple at $196,000 MAGI would normally get hit with IRMAA
• But with a $12,000 deduction, their MAGI drops to $184,000 — under the threshold
• That could save hundreds per year, per person on Medicare premiums

5. Roth Conversion Opportunities May Improve

Lower taxable income from the new deduction and the continued lower tax brackets could create a prime opportunity to convert pre-tax retirement funds to Roth IRAs while keeping your tax rate reasonable.

If you're between retirement and RMD age (currently 73), this window might be your best shot at shifting funds into Roth without triggering higher taxes or IRMAA.

Quick Summary: Key Benefits for Retirees

6. Permanent Rise in Estate and Gift Tax Exemption

Maybe the biggest win for retirees with estates is the new exemption:

• The federal estate tax exemption is now $15 million per individual ($30 million per couple), up from ~$14 million
• This increase is permanent and indexed for inflation starting in 2026
• Without it, the exemption was set to drop to around $7 million in 2026

Why it matters:

• Estates below $15 million now owe no federal estate tax
• Those above won’t be taxed until they exceed that limit
• Portability rules and GST exemptions remain unchanged 

7. SALT Deduction Cap Increased to $40,000 (Temporarily)

If you live in a high-property-tax area, this one matters:

• The current $10,000 cap on state and local tax deductions (SALT) is raised to $40,000, starting in tax year 2025
• Cap increases annually:
  • $40,400 in 2026, growing ~1 % each year through 2029
• Income phase-out:
  • Begins at $500,000 AGI, fully phases to $10,000 cap above threshold
• Reverts to $10,000 cap in 2030 unless new laws are passed 

Why this matters for retirees:

• In high-tax states, retirees itemizing can now deduct up to $40,000 of SALT paid—this is massive, especially when combined with the senior deduction
• Even after elderly deduction, higher SALT cap may yield extra savings when filing jointly

What You Should Do Now

1. Review your 2025 projected income
   This will help you see if you qualify for the deduction and avoid IRMAA.
2. Revisit your withdrawal strategy
   It may make sense to adjust how much you take from tax-deferred accounts.
3. Explore Roth conversions
   Consider filling up lower brackets while they’re still available.
4. Talk with your advisor or CPA
   A small amount of planning now could lead to meaningful tax savings.

The rules are changing, but your goals haven’t. If you want a second set of eyes on your plan or want to explore tax-saving moves while the window is open, reach out. We’d be glad to help. You can setup a complimentary call here. 

Trey Gevers CFP®
Financial Advisor & Partner
Phone: 425-902-4840
Email:tgevers@geverswealth.com
5825 221st Pl SE
Suite 102
Issaquah, WA 98027
geverswealth.com