Tips for seniors in preparing their taxes Internal Revenue Service
Your age and/or whether you fall under the IRS category of blindness will increase the basic standard deduction. Those over age 65 will see a higher standard deduction as well as those considered blind – if you qualify for both, your standard deduction is greatly increased. For those who itemize deductions, the cap on State and Local Tax (SALT) deductions jumps from $10,000 to $40,000 for most taxpayers earning below $500,000, effective through 2029. A major shift occurred with the passage of the Tax Cuts and Jobs Act of 2017 (TCJA), which eliminated the personal exemption for tax years 2018 through 2025 by reducing its value to zero. This was part of a broader restructuring of the tax code aimed at simplification. To offset the removal of the personal exemption, the TCJA nearly doubled the standard deduction and expanded the value and availability of other benefits, such as the Child Tax Credit.
Who can’t claim the Standard Deduction?
That’s because single filers can claim the full $40,000 SALT deduction. In contrast, married couples filing jointly would share that amount between both spouses. Additionally, unlike federal tax brackets and deductions that generally double for married filers, state tax brackets may not double for married filers compared to single filers. Itemized deductions allow individuals to subtract designated expenses from their taxable income and can be claimed in lieu of the standard deduction. Itemized deductions are more uniquely tailored and favored Standard Deduction by taxpayers in higher-income brackets. The larger the standard deduction, the less income is subject to taxation.
The new bill primarily extends many provisions from the original 2017 Trump tax cuts, known as the Tax Cuts and Jobs Act (TCJA). It also offers several new tax breaks and makes significant cuts and reporting changes to Medicaid and SNAP. While it’s likely they’ve already been itemizing to take advantage of the mortgage interest deduction, the higher SALT cap may also open the door for others to begin itemizing. When it comes to taxes, the most important thing is being strategic and maximizing your deductions as much as possible.
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You will find that many states that impose an income tax will also allow you to claim a similar type of Standard Deduction on your state income tax return. Moreover, legally blind individuals can claim extra deduction provided they are blind on the last day of the tax year. That said, a person claimed as a dependent on another individual’s return gets a deduction. If you are 65 or older and blind, the extra standard deduction is $4,000 for 2025 if you are single or filing as head of household.
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Taxpayers are entitled to take the full standard deduction even when their own deductions total less than that amount. For example, if you own a home, you may be able to deduct your mortgage interest, points, and insurance, which could be more than the standard deduction. These updates will likely influence how people approach their tax returns this year. The significant increase in deduction amounts under the 2017 Tax Cuts and Jobs Act (TCJA) tax made taking the standard deduction even more typical. The IRS generally increases the amount of the standard deduction every year to account for inflation. Now, a bill proposed by Rep. Marjorie Taylor Greene (R-Ga.) and supported by President Trump proposes eliminating capital gains taxes entirely on primary home sales, with no cap on the exclusion.
What Is the California Standard Deduction?
And now, the new Trump tax package, dubbed the “One Big Beautiful Bill” (OBBB), contains additional changes to the standard deduction. The no capital gains tax on home sales bill would need to pass Congress, overcoming debates about its impact on the federal budget and the fairness of its tax policy. This bonus deduction, which expires after 2028, is designed to benefit older taxpayers. Although some policy analysts estimate that it will likely be most helpful for retirees and older adults with middle incomes. You may have heard that on July 4, 2025, President Trump signed massive reconciliation legislation into law.
It’s also important to note that some states offer standard deductions. However, while some offer standard deductions that mirror the federal amounts, others provide lower standard deductions or none. But now, with the passage of new tax legislation, here are the standard deduction amounts for 2025.
The standard deduction is a dollar-for-dollar reduction in taxable income, lowering the amount that a taxpayer owes the Internal Revenue Service. All taxpayers with earned income, whether from a day job or side hustle, qualify to deduct a specific amount from their income before paying any taxes. Deciding between the standard deduction and itemizing requires comparing your potential itemized deductions to the standard deduction amount for your filing status. If you are uncertain whether itemizing deductions will save you money on your tax return or whether you can claim the standard deduction, consult a trusted, qualified tax advisor.
- The new tax bill signed into law in July has changed the landscape for many taxpayers by making permanent, or expanding, numerous tax cuts from earlier tax-cut legislation.
- It will only be available from the 2025 through 2028 tax years and will supplement, but not replace, the existing extra standard deduction already available to older adults.
- (However, the total cannot exceed the basic standard deduction for your filing status).
- For those who live in high-tax states like New York, California, or New Jersey, that could translate to thousands of dollars in tax savings.
- The Standard Deduction amount typically increases each year due to inflation.
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The standard deduction is a powerful tool for trimming your tax bill because it reduces how much of your income is subject to tax. Plus, the standard deduction is one of the easiest tax benefits to claim — for most taxpayers, the IRS is going to let you claim it, no questions asked. The offers that appear on this site are from companies that compensate us.
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- To offset the removal of the personal exemption, the TCJA nearly doubled the standard deduction and expanded the value and availability of other benefits, such as the Child Tax Credit.
- The IRS defines AGI as “gross income minus adjustments to income.” Gross income is made up of things like wages and other income, capital gains, and retirement distributions.
- If a qualifying vehicle loan is later refinanced, interest paid on the refinanced amount is generally eligible for the deduction.
Overall, this deduction change means that retirees paying significant amounts in state or property taxes can potentially deduct more from their federal taxable income. While 9 states have no income tax, no state is entirely free of state and local taxes. Depending on where you live, the average person pays between $4,722 for the lowest SALT in Alabama to $14,974 annually in the District of Columbia. Adjusted gross income is your total taxable income after any adjustments or deductions have been made.
