On July 4th 2025, Congress passed the One Big Beautiful Bill Act (OBBBA). In this article, we will summarize the key points of the act that impact pre-retirees and retirees.
1. Higher standard deduction made permanent
The higher standard deduction put in place in 2017 by the Tax Cuts and Jobs Act (TCJA) raised the standard deduction from $6,350 to $12,000 for individuals and $12,700 to $24,000 for couples. OBBBA made the higher standard deduction permanent. For 2025, the standard deduction is $15,750 for individuals and $31,500 for couples who file jointly. The higher standard deduction was set to sunset at the end of 2025, but OBBBA made it permanent.
Planning opportunity: Because of the higher standard deduction, many Americans do not itemize deductions anymore. Be aware of alternative methods to save on taxes, such as charitable deductions through qualified charitable distributions from your IRA once you are age 70 1/2 and over. Or, donor-advised funds to “lump” future charitable contributions together in one year to qualify for a deduction. Maximizing HSA and 401 (k) contributions before retirement is another way to avoid taxes outside the tax return.
2. Additional $6k deduction for those 65 and over
OBBBA added a deduction for individuals 65 or older by year-end: $6k for singles and $12k for couples if both are 65 or older. Phaseouts begin at Modified Adjusted Gross Income (MAGI) of $75k for single or head-of-household status and $150k for married filing jointly status. You will receive zero deduction if your MAGI is $175k and above for Single and Head of Household, and $250k and above for Married Filing Jointly.
Note: this does not replace the already existing deduction for anyone who is 65 and over: $1,600 per qualifying spouse if married, and $2,000 for single or head of household filers.
Planning opportunity: Don’t miss out on this deduction. By monitoring and controlling your distributions from IRAs, Roth IRAs, and taxable accounts, you can influence the amount of income you show each year which not only impacts this new deduction, but also impacts the cost of your Medicare premiums on part B and D
3. Lower marginal tax brackets made permanent
The marginal tax brackets that shifted more income to lower tax brackets in 2017 via the TCJA act were made permanent.
Planning Opportunity: We are in a historically low tax rate environment. Consider Roth conversions at favorable rates such as 0%, 10%, 12%, 22%, and 24%. “Fill up” the brackets and pay the taxes now so you will owe no taxes on the growth of that money later in retirement. Roth money is not only great for tax-free income later in retirement, but it is also one of the most tax-efficient methods for wealth transfer to your loved ones.
4. SALT – State and Local Tax Deduction
In 2018, under TCJA, the state and local tax (SALT) deduction was capped at $10k per return ($5,000 Married Filing Separately). Under OBBBA, the limit on SALT deduction was raised from $10k to $40k. This ceiling will increase 1% a year until 2029, after which it will revert to a $10,000 cap. However, this additional $30k in SALT deduction begins to phase out for MAGI greater than $250k individual and $500k couples.
Planning Opportunity: Be aware of the phaseout of this deduction if you are going to show a lot of income during the year, perhaps if you are selling a home or incurring large capital gains, have large non qualified deferred compensation paying out, or large IRA distributions, be mindful of the phaseout limits and manage your income when possible to qualify for the maximum SALT deduction.
5. Charitable contribution deduction for non-itemizers
Because many Americans no longer itemize deductions due to the higher standard deduction, fewer arereceiving a benefit from donating to charities and churches. Under OBBBA, for non-itemizers, cash contributions up to $1k for single and $2k for married filing jointly couples can be deducted, even without itemizing.
Planning Opportunity: This allows a deduction for non-itemizers. However, if you are inclined to be charitable, you should review all your options, as the optimal way to donate to a charity or church varies by age and situation. Qualified Charitable Distributions, Donor Advised Funds, donating appreciated stock, and more are additional methods beyond a straight cash donation to qualify for deductions outside of Schedule A, where you itemize deductions.
6. Lifetime gift estate exemption is made permanent
Most Americans will never pay any estate or gift taxes. Congress made the higher estate and gift tax exemption permanent. In 2026, you have to gift and/or leave an inheritance of over $15M as an individual or $30M as a couple to be taxed on your estate.
Planning Opportunity: If one of your goals is to gift money to your heirs during your lifetime, you can gift up to $19k per person each year without incurring gift tax. You can gift more than $19k if you want, and still not owe any taxes. Read our gift blog to learn more.
Conclusion
To conclude, tax law changes are constantly evolving, and by understanding their impact on your retirement, you can make informed decisions that reduce the erosion of your portfolio over time. Bad decisions around taxes, healthcare, estate, and income strategy can compound faster than bad markets.
Our goal is to provide as much clarity through education so that you can make decisions that lead to better outcomes!
The Vocare Wealth Advisors Team
Any opinions are those of Vocare Wealth Advisors and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
