OB3 - What You Need to Know (Pt. 3)

Ah, the last of the OB3 highlights - the enhanced deduction for senior citizens. Pre-2025 tax year, seniors over the age of 65 were eligible for an additional $1550-1950 on top of the regular standard deduction, depending on filing status.

Important note: the marketing around this bill, as well as an email from the Social Security Administration, proclaimed that this provision eliminated tax on social security. This is not the case. Social security is taxable in the same manner it was before.

Enhanced Deduction for Seniors

This new deduction provides up to an additional $6,000 for individuals who are age 65+ at the end of the tax year. It is subject to reduction depending on your adjusted gross income (AGI). It is reduced by 6% on AGI that exceeds the following:

• $75,000 for single filers

• $150,000 on a joint return

This means that if your AGI is $100,000 as a single filer, your deduction will be reduced by $1,500 or 6% of the $25,000 overage.

The Details

• Applies to tax years 2025 through 2028.

• Married tax payers must file a joint return to receive this deduction.

• You must include your social security number on your tax return - not available for ITIN holders.

Final Thoughts

This is a complex one due to phase-outs. Married taxpayers phase out separately from each other, which is different from the way most other deductions are phased out.

Many seniors were affected by the way this was marketed and may have prematurely turned off withholdings on their social security. If this speaks to you, I recommend speaking up about this to your tax preparer so that they can provide guidance and alleviate future tax shocks in the next tax year.

Sources:

Gorczynski, Tom. Compass Tax Educators. Federal Tax Update (2025)

Wolters Kluwer, Federal Tax Updates (2025)