You’ve likely heard now that a few weeks ago Congress passed the One Big Beautiful Bill Act, which President Trump signed into law on July 4th.

It’s a huge bill, with sweeping tax implications for individuals, families and businesses. For the next several months I’m going to explain certain changes or new items that have come from this law. These articles will be geared toward Wyoming retirees, but we hope many readers will find them helpful.

This month we’ll start by explaining the new tax deduction available to certain seniors, and clear up some confusion about how this affects taxes paid on Social Security benefits.

The Standard Deduction and Senior Deduction

The senior deduction is not to be confused with the standard deduction which most people receive on their taxes. The standard deduction is available to any tax filer, and in 2025 the standard deduction for single taxpayers is $15,750, $31,500 for joint filers, and $23,625 for head of household. These values are slightly higher than they would have been otherwise due to an inflation adjustment that was made as part of the new law.

About 90% of US households claim the standard deduction. As a reminder, you would need sufficient itemizations on your tax return to exceed $31,500 for joint filers for it to make sense to itemize your deductions. Itemized deductions include things like property and sales taxes, medical expenses above a certain level, mortgage interest paid, and charitable giving.

The new law introduces an additional deduction for seniors who will be at least age 65 by the end of 2025. This deduction is $6,000 per person, and it gradually phases out above certain income limits, starting at $150,000 adjusted gross income (AGI). This deduction is temporary, lasting from 2025 through 2028.

Example: Jacob and Jan Smith are married and both age 66 in 2025. Their adjusted gross income in 2025 is $120,000. They do not itemize their deductions, so they claim the standard deduction of $31,500. They are both eligible for the new senior deduction at $6,000 each. Their taxable income for 2025 will be $76,500 ($120,000 - $31,500 - $6,000 - $6,000), which is $12,000 lower than it would have been previously due to the new senior deduction. They are in the 12% marginal tax bracket, so this deduction had the effect of lowering their 2025 taxes by an extra $1,440 ($12,000 * .12).

Note that the senior deduction is not a tax credit, which lowers your taxes owed. Deductions only lower your taxable income, from which you can determine how much you owe in taxes.

Social Security is still taxable

When this new law came out, a public statement from the Social Security Administration about how the senior deduction affects taxes caused some confusion. Here’s what part of the letter says:

“The new law includes a provision that eliminates federal income taxes on Social Security benefits for most beneficiaries, providing relief to individuals and couples. It does so by providing an enhanced deduction for taxpayers aged 65 and older, ensuring that retirees can keep more of what they have earned.”

But the senior deduction and Social Security aren’t related in the way this letter alludes to. Social Security follows its own unique tax rules, which you can read up on here. Tax deductions, like the standard deduction and the new senior deduction, reduce your total income, including taxable interest and dividends, wages, IRA withdrawals, pension income, and Social Security income.

To better illustrate this I’ve included the chart below, which summarizes the first 15 lines of a standard 1040 tax return.

Notice that the Total Deductions (the standard and senior deductions added together) reduce Total Income, not just Social Security.

Further, even if someone receives no Social Security benefits, they are still eligible for the senior deduction if they meet the other requirements. And of course, keep in mind that someone receiving Social Security benefits before the age of 65 will not be eligible for the senior deduction.

We hope this article has been helpful. With the One Big Beautiful Bill Act, making the standard deduction permanent and introducing the new senior deduction for eligible seniors will help reduce taxes for eligible households, just remember how the tax treatment of deductions works, and certain restrictions, like the age and income requirements, which may make some households ineligible for the senior deduction.