The One Big Beautiful Bill: What Retirees Need to Know About the New Tax Law

If you’ve turned your television on in the last 6 months, you’ll know there’s been a lot of discussion on the latest tax bill barreling through Congress. The massive 800-page bill has officially been passed. Some of the questions you might be asking are: What does this mean for me? What stays the same? What’s going to change? How does this affect my retirement plan? In this blog, we’ll give you a preview of some of the critical provisions most likely to impact your current or future retirement planning strategies.

Permanent Extension of Lower Tax Brackets

Under the original Tax Cuts and Jobs Act of 2017 (TCJA), tax brackets were set to revert to their previous levels. Under the Big Beautiful Bill, the tax brackets under the TCJA are made permanent. This extends favorable tax rates for middle and upper-middle-income retirees. Not only does it affect your marginal tax brackets, but it has implications on any Roth conversions you might do, how you manage your Required Minimum Distributions, and even how you look at recognizing capital gains.

Permanent Increase to the Standard Deduction

The standard deduction under the TCJA has also been made permanent. This increases the amount of income shielded from taxation for single and married taxpayers. Below is a chart showing the difference between the standard deduction before the TJCA and now.

Pre-Tax Cut & Jobs Act	Now (2025)	Difference
$6,350 (Single)	$15,750 (Single)	$9,400
$12,700 (Married)	$31,500 (Married)	$18,800

 

Temporary Bonus Senior Deduction

Under the Big Beautiful Bill, individuals 65 or older will also receive an additional $6,000 deduction per person. This applies whether you take the standard or itemize your deductions. It is subject to an income phase-out of $75,000 (single) and $150,000 (married filing jointly).

This bonus deduction does not change how Social Security is taxed. That remains the same under this new law. Also, you do not need to have claimed your Social Security benefits to receive this deduction.

Example: For a married filing jointly couple both over the age of 65 who take the standard deduction, your standard deduction would be $34,700 ($31,500 standard plus $1,600 for each filer over the age of 65), then they also get the new bonus senior deduction, which is $6,000 per individual age 65 and older. This makes their total deductions $46,700.

Charitable Deduction Changes

Under the new tax law, an additional deduction was created for charitable donations for those claiming the standard deduction. This means that you can deduct up to $1,000 (single) or $2,000 (Married Filing Joint) for cash contributions made to qualified charitable organizations starting in 2026. This deduction is a welcome addition for those who are charitably inclined but don’t meet the threshold to itemize on their return.

Another change is for those who itemize their deductions. There is now a 0.5% AGI floor for deducting their charitable donations. For example, if you have an Adjusted Gross Income of $100,000 in 2026, you must donate at least $500 to charity before you can claim any charitable donations on your taxes. You need to be aware of this hurdle when itemizing your charitable donations.

Increased temporary SALT Deduction

The additional SALT (State and Local Tax) deduction offers relief for residents of high-tax states. Under the TCJA, this deduction was limited to $10,000. From 2025 to 2030, the expanded SALT deduction rises to $40,000. This $40,000 limit will increase by 1% for inflation through 2029. This deduction will most likely benefit those living in states like California or New York with upper-middle-class incomes. There is a phase-out for individuals with a modified Adjusted Gross Income exceeding $500,000, regardless of whether they file as single or married.

For example, if you itemize, with state taxes of $15,000 and property taxes of $10,000, you can now deduct the full $25,000 as an itemized deduction as long as you’re under the phaseout. Before, under the TCJA, you were limited to the $10,000 cap.

Estate & Gift Tax Exemption Set at $15 Million

Under the TCJA, the estate tax exemption was set to sunset from $13,900,000 to roughly $5 million. Under this new law, that exemption is permanently increased to $15 million per individual, or $30 million per couple. Portability, or the ability for one spouse to use the remaining estate tax exemption from their deceased spouse, also remains intact.

While most individuals will not have an estate that exceeds $30 million, this increased exemption is not a suitable replacement for an estate plan. Make sure you have a competent attorney who can help you put the necessary provisions in place to make a smooth transition of assets for you and your family.

Healthcare updates under the Big Beautiful Bill

The One Big Beautiful Bill expands the definition of a High-Deductible Health Plan (HDHP), which individuals must have to be able to contribute to a Health Savings Account. With the new rules, all “Bronze” and “Catastrophic” plans offered on Affordable Care Act exchanges qualify as HDHPs.

Additionally, the Affordable Care Act (ACA) subsidies that were extended post-COVID are ending in 2025. This affects retirees under 65 receiving subsidies under these marketplace plans. Don’t hesitate to get in touch with your financial advisor to revisit what income thresholds are affected by this change. You may also want to consider making adjustments to your healthcare plan and review your timeline for Roth conversions.

Conclusion

The One Big Beautiful Bill does provide at least one promising thing to retirees – clarity. With many of the Tax Cuts and Jobs Act provisions being made permanent, including tax brackets, an enhanced standard deduction, and the new changes to charitable giving, the future looks bright for those entering retirement. If you’d like to discuss how these new provisions will affect your retirement plan in greater detail, contact one of our retirement planning specialists at Peterson Wealth Advisors.

Information on these provisions is discussed in greater detail in a previously recorded webinar on our website. Watch the webinar here.