Retirees Catching Some Big Tax Breaks in 2025
Category: Financial and taxes in retirement
November 30, 2025 — The federal tax bill that comes into effect for 2025 has some very nice tax breaks coming your way. Along with the even bigger tax cuts for the ultra rich, they might send the country into insolvency, but at least you get to enjoy a lower tax bill this April 15.
The AARP has an excellent summary article of the 2025 tax changes embedded in the OBBB. We will just briefly summarize them by category. Check out the AARP article for a fuller discussion.
Standard Deduction. Now set at $30,000, up from $29,500. People over 65 get an additional $1500.
Over 65. A couple over 65 gets a $12,000 deduction, depending on MAGI income limits. The extra phases out after $150,000 in Modified Adjusted Gross Income.
Higher SALT deduction. The deduction for State and Local Taxes doubles from $10,000 per person to $20,000 ($40,000 for married couples filing jointly). It phases out when MAGI goes over $500,000 (couples).
Car loan interest. Certain (smaller) cars finished in the U.S. can get you up to $10,000 in interest deducted with MAGI adjustment).
Larger catch up 401(k) contributions. Savers who are 60-63 get a larger catch up 401(k) contributions. Savers who are 60-63 of up to $34,750.
Tipped workers. Workers in certain traditional tipped workers categories can deduct up to $25,000 in cash tips, with a MAGI adjustment over $300,000 (joint filers).
Overtime pay. Those who receive overtime pay can deduct up to $25,000 (joint) of it, with MAGI adjustment.
Comments? What will you do with the extra cash you will very likely receive as an IRS refund? Just help ends meet, or take a trip somewhere?
Comments on "Retirees Catching Some Big Tax Breaks in 2025"
Rufus says:
What are the "even bigger tax breaks for the ultra-rich"? Where can I find that info. ?
Admin says:
We asked AI to answer this question, and then checked it against other sources. It appears correct:
The OBBBA, signed into law on July 4, 2025, has generally provided significant tax benefits to the wealthiest individuals and corporations.
Lowered Top Marginal Tax Rate: The bill made the top individual income tax rate of 37% permanent, rather than letting it revert to the previous 39.6%. This primarily benefits the highest earners.
Estate Tax Cuts: The act permanently increased the lifetime estate and gift tax exemption to $15 million per individual (and $30 million per married couple), meaning fewer wealthy estates are subject to the tax.
Pass-Through Business Deduction: It permanently extended the 20% deduction on pass-through business income (for owners of S corporations, partnerships, etc.), the majority of which benefits the top 10% of income earners.
Capital Gains Exemptions: It increased the exclusion for capital gains from the sale of qualified small business stock (QSBS) from $10 million to $15 million, a provision that overwhelmingly benefits investors with high incomes.
Corporate and Business Tax Cuts: Various other business tax incentives and permanent corporate tax cuts were included, with research consistently showing that the benefits of corporate tax cuts largely flow to top earners and business owners.
Rufus says:
I've read articles that list what percentage of the overall tax burden is paid by each income group and it would appear the rich pay more than there fair share. I'm not rich. In retirement our household income is $52,000 per year total. We do fine and we aren't the least bit jealous of the rich at any level. They make it happen on a large scale while the brave small business men and women make take up the slack. God bless the innovators at all levels.
Mike says:
A study by the Urban-Brookings Tax Policy Center breaks down the tax cuts by quintile: lowest quintile 0.8% cut, second quintile 1.7% cut, middle quintile 2.3% cut, fourth quintile 2.6% cut, top quintile 3.4% Tax cuts are only part of the picture, aspects of the OBBA affect other programs that help lower household resources. The Congressional Budget Office estimates the poorest 10% of Americans will see a decrease of $1,600 in household resources, middle income households will increase by $500-$1,000 and the richest 10% households will see an increase of $12.000.
Mike says:
A group of millionaires trying to fix the tax system would disagree with the rich pay their fair share reasoning: https://patrioticmillionaires.org/perspectives/dont-fall-for-the-idea-that-the-rich-pay-their-fair-share/
Rufus says:
I've concluded that no matter what the data says if you're determined to believe the "Rich" don't pay their fair share nothing will change your mind. I did some research and article after article showed the rich paying the vast majority of federal tax. Even an article by CBS ( definitely not rightwing ) agreed the rich pay the highest amount of federal tax by far. Check it out. Don't just pick the sources that say what you want to hear; be openminded. The powers that be have us all talking about who should be paying more instead of how can we cut wasteful spending, thus the waste just keeps on growing. As I've said before, my annual household income is $52,000 . My wife and I do just fine. I'm not a rich guy defending the rich. I'm not jealous of them either.
AL says:
It’s not the amount of taxes the ultra rich pay that is unfair. It’s the PERCENTAGE of their income they pay that is unfair. Especially the billionaires. A billion is an obscene amount of money. It’s good the billionaires have people like you who believe their obscene lifestyles are fair. They follow the golden rule of he who has the gold makes the rules.
Admin says:
Here's an interesting factoid. the wealthiest 0.1% of Americans saw their wealth increase 90% from the 4th quarter of 2017 to 2025. Nice for them!
Rufus says:
You can always move somewhere where there aren't any of those horrible billionaires, where there aren't any incentives to build wealth via innovation, inventions etc. I thank God for the rich. They've made our lives far better than they otherwise would be for us average folks. I can admit it and plan to stay right here in the good ole' USA. Happy Trails !
Clyde says:
Whether the rich pay their fair share of taxes or not depends on one’s definition of fair.
Admin says:
Thanks for the interesting conversation folks. I think we have exhausted the subject, at least as far the tax breaks go. Let's leave it here.