The “One Big Beautiful Bill Act,” recently passed by Congress, ushers in a new era of tax rules, offering targeted relief for some taxpayers while tightening benefits for other. The bill reshapes deductions and itemizations in several key ways. Here's what you need to know.
Extra Deduction for Seniors (2025–2028)
A major win for older taxpayers: individuals age 65 and older will be eligible for an additional $6,000 deduction per person for tax years 2025 through 2028. This new deduction comes on top of the standard deduction.
However, it is subject to a phaseout:
- For individual filers, the deduction phases out starting at an adjusted gross income (AGI) of $75,000.
- For joint filers, the phaseout begins at $150,000 AGI.
Taxpayers with income above these thresholds will see the additional deduction reduced or eliminated.
Standard Deduction Indexed for Inflation
To maintain its value over time, the standard deduction will continue to be adjusted annually for inflation. This ensures that taxpayers’ purchasing power is preserved and that the benefit of the standard deduction keeps pace with rising costs in future years.
Charitable Deductions: New Floor and Limitations (Starting 2026)
For those who itemize deductions, new rules on charitable contributions will take effect in 2026:
- 0.5% AGI Floor: Taxpayers will only be able to deduct charitable contributions to the extent they exceed 0.5% of their AGI. This means smaller contributions may no longer be deductible.
- AGI Limit Maintained for Cash Contributions: The current rule allowing deductions of cash contributions to public charities up to 60% of AGI will be preserved, avoiding the previously scheduled drop to 50%.
- Cap for High-Income Donors: Taxpayers in the 37% tax bracket will be limited to a 35% tax benefit for charitable contributions. This cap reduces the maximum value of the deduction, regardless of the size of the donation.
Conclusion
- The “One Big Beautiful Bill Act” makes meaningful adjustments to the tax code—enhancing deductions for seniors, preserving inflation protections, and restructuring itemizations for wealthier taxpayers. These changes will require careful planning, especially for those nearing retirement age or with significant charitable contributions. As always, working with a tax professional can help navigate the new rules and optimize your tax strategy.