I wanted to share some important updates from the recently passed One Big Beautiful Bill Act (OBBBA) that may be especially relevant to retirees. These changes affect income taxes, deductions, credits, and estate planning, and many will take effect in 2026. Here’s a summary of what’s changing: Income Tax & Standard Deduction: The Tax Cuts and Jobs Act (TCJA) tax rates have been extended and will no longer expire in 2026 as originally scheduled. The standard deduction is increasing in 2025 and will be indexed for inflation each year:
Senior Deduction (Age 65+): Starting in 2025, taxpayers aged 65 and older can deduct an additional $6,000, as long as their income is:
Credits & Deductions: From 2025 through 2029, the Child Tax Credit will increase to $2,200 per qualifying child. Tip Income Deduction: Up to $25,000 for individuals earning under $150,000 (single) or $300,000 (joint). Overtime Income Deduction: Up to $12,500 under the same income thresholds. Car Loan Interest Deduction (2025–2028): A new deduction allows up to $10,000 per year in interest on car loans for vehicles assembled in the U.S. Income must be under $100,000 (single) or $200,000 (joint) to qualify. State & Local Tax (SALT) Deduction: The SALT deduction cap has increased from $10,000 to $40,000. This change is effective immediately and will remain in place through 2030. Estate & Gift Tax: Beginning January 1, 2026, the estate and gift tax exemption will increase to $15 million per person. Clean Energy Tax Credits: The Energy-Efficient Home Credit will end on June 30, 2026. The $7,500 Electric Vehicle (EV) Credit will no longer apply to vehicles purchased after September 30, 2025. If you’re reviewing your financial plans for the coming year or thinking ahead about your legacy, these updates may be worth discussing. Please let me know if you have any questions or need help finding more detailed information about any of these changes. |
Key OBBBA Tax Updates for Retirees
