Tax Relief for the 65+ Population: New OBBB Deductions

If you are 65 or older, the 2026 tax filing season looks very different than it did just two years ago. Thanks to the One Big Beautiful Bill (OBBB), there is a new "Senior Bonus Deduction" designed to help retirees keep more of their fixed income.

If you have been avoiding filing back taxes because you were worried about the bill, these new rules might actually be the key to wiping out your debt.

The "Triple Stack" Deduction

For 2026, eligible seniors don't just get one deduction—they get three layers of protection for their income:

1. The Standard Deduction: For 2026, this has increased to $16,100 (Single) or $32,200 (Married Filing Jointly).
2. The Pre-Existing Senior Addition: Seniors still get the "extra" standard deduction they’ve always had, which is now $2,050 (Single) or $1,650 per spouse (Married).
3. The NEW Senior Bonus Deduction: This is the OBBB's crown jewel—a flat $6,000 deduction per person (so $12,000 for a couple where both are 65+).

The Bottom Line: A married couple (both 65+) can now earn up to $47,500 before paying a single penny in federal income tax.

Do You Qualify for the Full $6,000?

The OBBB designed this deduction for middle-income Americans, so there are some "phase-out" rules to be aware of:

• Single Filers: You get the full $6,000 if your Modified Adjusted Gross Income (MAGI) is $75,000 or less.
• Married Filing Jointly: You get the full $12,000 if your combined MAGI is $150,000 or less.
• If you earn more: The deduction reduces by 6 cents for every dollar over those limits. It disappears completely once you hit $175,000 (Single) or $250,000 (Joint).

"No Tax on Social Security"?

During the 2024 campaign, this was often called the "No Tax on Social Security" plan. While the law didn't technically change the formula for how Social Security is taxed, the massive increase in the total deduction amount means that for about 88% of seniors, their Social Security benefits will now be effectively tax-free because the deductions completely offset the income.

How This Helps with Back Taxes

If you owe the IRS for previous years, we can use these 2025 and 2026 rules to your advantage.

• Lowering Liability: By maximizing these new OBBB deductions, we can often bring your current year tax liability to zero, allowing every penny of your payments to go toward your old debt.
• Settlement Power: If we are filing an Offer in Compromise (OIC) to settle your back taxes, these higher deductions prove to the IRS that you have less "disposable income" to pay them, which can lead to a lower settlement amount.

Don't Miss Out on the Retroactive Benefit

Remember, the OBBB was signed in July 2025 but made retroactive to January 1, 2025. This means if you haven't filed your 2025 return yet, or if you need to amend it, you can still claim that first year of the $6,000 bonus.