The One Big Beautiful Bill Act

The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, enacting several changes into the tax code—affecting both retirees and pre-retirees.

But OBBBA is more than the latest viral acronym dominating the news cycle. It represents significant provisions that can affect your:

• Social Security income tax
• Standard deduction allowance
• Estate and gift taxes

The bill also introduced a new bonus deduction for those aged 65 and over.

While some of the changes for seniors are permanent and may impact your longevity considerations as well as your retirement planning process, others will be temporary and available for a limited period of time. So, what are these changes, and how could they affect your retirement plan?
 

New bonus deduction for seniors—are you eligible?

For 2025 through 2028, a new bonus deduction of up to $6,000 for individuals and $12,000 for couples becomes available whether you file the standard deduction or itemize your deductions.¹

If you are single and your adjusted income is over $75,000, you can expect the deduction to begin phasing out at $75,000 with full phase-out at $175,000.²

For couples filing jointly, those numbers are $150,000 for early phase-out topping out at adjusted income of $250,000.³

While OBBBA does not directly address the popular idea of tax-free Social Security benefits, the deduction could significantly reduce the amount of your benefits subject to federal income tax.
 

Social Security tax repeal and the OBBBA reality

While promises of Social Security tax repeal surface like clockwork during the ebb and flow of our election cycles, OBBBA did not deliver directly on that hope. In fact, about 40% of Social Security recipients paid taxes on a portion of their benefit last year, compared to only 10% in 1984.⁴

The “byrd rule,” named after Senator Robert Byrd of West Virginia, limits the ability of congress to alter social security benefits or funding. As such, elimination of Social Security taxes has never been a reality despite political hype and promises.

However, the bonus deduction effectively serves as a work around that offers similar potential benefits, depending on your income level. Lower income retirees, who already pay little to no income tax on their Social Security benefits, won’t see much change.

But if you are a middle-income retiree, the change could reduce your taxable income and lower the tax you may owe. In some cases, the deduction could eliminate your tax burden all together.

Keep in mind that up to 85% of Social Security income can be subject to federal tax and significantly impact your taxes in retirement. For example, if your provisional income exceeds $25,000 for individuals or $32,000 for couples, as much as 50% of your benefits are subject to taxation. It quickly climbs to the 85% threshold for folks above $34,000 for a single filer, or $44,000 for couples. And when you consider that those thresholds haven’t been adjusted since the 1980s, growing numbers of retirees are seeing increased taxes on their Social Security benefits.
 

Estate and gift tax planning changes can impact your retirement planning decisions

The gift tax debate has droned on in Washington for generations. One of the most sweeping and permanent changes introduced into law by OBBBA has been to increase tax exemptions for federal estate and gift tax exemption to $15 million for 2026. Without this legislative change, such exemptions would have decreased to roughly $7 million in 2026.⁵ Because the change does not expire or sunset, an entirely new law would be needed for the exemption to be decreased. As such, it would require new law (rather than mere inaction) for federal wealth transfer tax exemptions to change.

Keep in mind that permanence in federal legislation is, by nature, fleeting. So, make sure to revisit your estate plan with your financial professional to ensure that you take advantage of the law today, rather than miss out tomorrow. In particular, if your estate is substantial, be sure to reevaluate your strategic wealth transfer goals or revisit your existing will.

So, whether you’re considering early retirement, nearing retirement, entering retirement or already executing your retirement strategy, the One Big Beautiful Bill Act changes could put additional money in your pocket—or entirely change how you plan for taxes. If you want to learn more about how OBBBA affects you, contact your financial professional today.