Unpacking the OBBBA – Changes to Standard Deductions
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By Ben Dolan, CFP®
In the chance you’ve had enough time at the beach this Summer and are ready to do something more fun, like consider changes to the tax code (ha!), we have you covered! While the OBBBA touches MANY different sections of the code, we are going to roll out the changes to you in bite-size format to keep your head from spinning off your shoulders and onto the floor. So, consider this OBBBA notice #1.
In 2025, under section 70102 of the OBBBA, the standard deduction has increased. Below is the change from the current law, under the Tax Cuts and Jobs Act (TCJA), along with the new law under the One Big Beautiful Bill (OBBBA). The new deduction amounts will be adjusted for inflation going forward.
On top of the increase to the standard deduction, seniors age 65 or older will receive an additional, but temporary, deduction of $6,000 for single filers or $12,000 if both spouses are 65+ and file jointly. This deduction is only available from 2025 through 2028. Also, the deduction is subject to a phaseout based on Modified Adjusted Gross Income (MAGI). In short, single filers with $175,000 of income and joint filers with $250,000 of income will be phased out of the deduction.
As you may or may not be aware of, under current law, seniors age 65+ or blind receive an additional deduction of $2,000 for single filers and $1,600 for each eligible married filer. Assuming filers don’t enter the phaseouts, here’s a breakdown of how the deduction totals for single filers, joint filers with one spouse 65+, and joint filers with both 65+:
An increase in the amount you can deduct on your taxes, whether via the standard deduction or by itemizing, may present planning opportunities. For our clients, we are already in the process of incorporating these changes (and others in the bill) into our tax planning.
Stay tuned for more commentary on the OBBBA soon!
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