Federal tax benefits for those 65 and older
When you turn 65, several federal tax provisions may reduce your tax liability. Recent legislation, including the One Big Beautiful Bill (OBBB) signed into law in July 2025, has introduced new, temporary benefits for seniors.
2025 Senior Bonus Deduction (Temporary)
For tax years 2025 through 2028, a new, temporary deduction up to $6,000 for single filers ($12,000 for married filing jointly if both are eligible) is available for eligible taxpayers aged 65 or older. Eligibility requires being 65 by December 31, 2025, having a Social Security number, and not filing as married filing separately. Income limits apply, with the deduction phasing out for higher earners. This deduction can be taken even if you itemize.
Additional standard deduction
Individuals 65 and older receive an additional standard deduction amount. In 2025, this extra amount is $2,000 for single filers and $1,600 per qualifying person for married filers. An extra deduction is also available if you are blind. For example, a single filer aged 65 or older could have a total standard deduction of up to $23,750 in 2025, assuming eligibility for all components.
Credit for the Elderly or Disabled
This is a non-refundable tax credit for eligible low-to-moderate-income individuals. The credit ranges from $3,750 to $7,500 based on filing status and income. Eligibility requires being 65 or older or retired on permanent and total disability, and meeting certain income requirements. To claim the credit, you must file Schedule R.
Filing with Form 1040-SR
Taxpayers aged 65 or older can use Form 1040-SR, a version of Form 1040 with a larger font and a standard deduction chart, designed for easier filing.
Medical expense and HSA considerations
Managing healthcare costs is a key financial aspect of retirement. Tax provisions for medical expenses and Health Savings Accounts (HSAs) can offer relief.
Medical expense deduction
In 2025, you can deduct qualified, unreimbursed medical and dental expenses exceeding 7.5% of your adjusted gross income (AGI). This requires itemizing deductions on Schedule A. Deductible costs can include Medicare Part B and D premiums, and some long-term care insurance premiums.
Health Savings Accounts (HSAs)
Individuals 55 or older can make an additional $1,000 catch-up contribution to their HSA in 2025. After age 65, HSA withdrawals for non-medical expenses are not penalized but are taxed as ordinary income. Once enrolled in Medicare, you cannot contribute to an HSA, but you can use existing funds for qualified medical expenses tax-free.
Comparison of deductions for seniors (2025 tax year)
| Feature | Existing Additional Standard Deduction | New Senior Bonus Deduction (OBBB) |
|---|---|---|
| Eligibility | Age 65+ | Age 65+ |
| Amount (Single) | $2,000 | Up to $6,000 |
| Amount (Married, Jointly) | $1,600 per eligible spouse | Up to $12,000 if both eligible |
| Availability | Permanent feature of the tax code | Temporary (2025-2028 tax years) |
| Itemizers | Not available to itemizers | Can be claimed even if itemizing |
| Income Limits | No income phaseout | Phased out for MAGI above $75k (single) / $150k (married) |
Other tax considerations for retirees
- Taxation of Social Security benefits: The taxability of Social Security benefits depends on your combined income. While not fully tax-free for all, the new OBBB deductions may reduce or eliminate tax for many with lower to middle incomes.
- Self-employment: Retirees with net self-employment earnings of $400 or more must pay self-employment tax for Social Security and Medicare. Business expenses can be deducted.
- State and local taxes: State laws vary regarding property tax relief for seniors and the taxation of Social Security benefits.
- Required minimum distributions (RMDs): Be aware of current RMD age rules to avoid penalties. Qualified charitable distributions (QCDs) from an IRA after age 70 1/2 can satisfy RMDs.
Conclusion
Turning 65 provides access to several federal tax benefits, including an increased standard deduction and the temporary 2025-2028 Senior Bonus Deduction. Eligibility for credits like the Credit for the Elderly or Disabled and deductions for medical expenses can further reduce tax liability. The Form 1040-SR simplifies filing for seniors. Given the recent changes and potential complexities, consulting a tax professional is recommended to maximize tax savings and adjust your financial plan.
This article provides general tax information and should not be considered tax or financial advice. Consult a qualified professional for guidance on your specific situation.
