What “One Big Beautiful Bill” Means for Retirees

By now, you’ve heard that on July 4, 2025, the “One Big Beautiful Bill” (OBBB) was signed into law. What does that mean for you? Is your tax bill about to go up?

The problem with new tax bills is that in the beginning, most people don’t know how the changes will affect them personally.

Sensational media headlines and a polarized political climate contribute to the noise. The final bill ended up around 870 pages long.

Bedtime reading, anyone?

Most people will need a plain-English breakdown of the changes to fully understand how OBBB affects them. Today, I will highlight four major components of the new tax law and show (with examples) how retirees will be impacted.

1. Tax Brackets Remain the Same

   
   

This was a major win for taxpayers.

Without this bill, most federal tax rates were set to rise in 2026.

All year, I’ve been telling clients that I believed current tax rates would be extended, but it was not a sure thing until they passed the bill.

Now we know what tax rates will be in 2026 and beyond – until Congress changes the law again in the future 😁.

Example:

As joint filers, Clark and Lois expect to have a combined taxable income of $200,000 in 2026.

With the extension of current tax rates, they remain in the 22% federal tax bracket.

Had rates reverted to pre-TCJA levels, they would have found themselves in the 25% federal tax bracket.

That 3% difference in their marginal tax rate could mean thousands of dollars in federal tax savings.

That’s Super.

2. Temporary Deduction for Seniors

Effective this year until December 31, 2028: An additional $6,000 exemption available to seniors age 65 or older, on top of the standard deduction.

For joint filers where both spouses are age 65+, that is a $12,000 total deduction.

No, it’s not a tax break on Social Security benefits. But it will reduce taxable income for seniors who qualify.

To qualify, Adjusted Gross Income must be below:

• $75,000 for single filers

• $150,000 for joint filers

If you receive Social Security benefits and take withdrawals from your retirement accounts, it will require some careful planning to stay under the income threshold.

3. Increased State and Local Tax Deductions

This change will really affect those living in states with high income taxes (like Hawaii!).

The amount of deduction you can take for state and local taxes paid has quadrupled.

Previously capped at $10,000, the new tax bill now allows you to deduct up to $40,000 of state and local taxes.

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Note: High-income earners will start to see their deductions capped.

The phaseout threshold starts at $500,000 Modified AGI.

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Here’s an example of how this change can affect your taxes:

When Bob meets with his CPA each year, he’s told to take the standard deduction which has been higher than his itemized deductions.

His usual deductible expenses include:

• Medical expenses (below the threshold to deduct)

• Mortgage interest: $5,000 

• State and local taxes: $23,000 (previously capped at $10,000)

• Charitable donations: $10,000 

  
  

Due to the SALT cap, only $10,000 of his state taxes were counted before. His itemized deductions totaled $25,000.

As joint filers, he and his wife Sue were better off taking the $31,500 standard deduction.

But with the cap on state and local tax deductions raised to $40,000, the math changes.

They can now count $23,000 in state and local taxes towards their itemized deductions instead of being capped at $10,000.

Their deductions now total $38,000. Greater than the standard deduction.

This allows them $6,500 more in deductions, resulting in tax savings of over $1,400 at their 22% tax bracket.

4. Changes Coming to Charitable Giving

Starting in 2026, there will be a floor on deductible charitable gifts.

Your charitable giving for the year must exceed 0.5% of your Adjusted Gross Income (AGI) to be deductible.

Example:

Sue’s Adjusted Gross Income is $100,000.

She gives $2,000 to her favorite charity.

The first $500 of her donation is not deductible.

She will be able to claim a $1,500 charitable deduction - if she itemizes her deductions.

 

More Opportunities to Deduct – Even Without Itemizing

Another key change: taxpayers taking the standard deduction will now be able to deduct their charitable giving, up to a limit.

• $1,000 for single filers

• $2,000 for joint filers

That means for a married couple in the 22% federal tax bracket, they can save up to $440 in taxes even if they don’t itemize.

This is a meaningful benefit for standard deduction filers who give to charity.

There’s More…

Since I wanted to specifically highlight the changes relevant to retirees in this post, I did not touch on other parts of the new tax bill.

Others of course will be affected, including:

• Business owners

• Service workers

• Parents with minor children

• Homeowners planning to install solar (tax credit expires after December 31, 2025)

• Tax CPAs everywhere (someone’s gotta learn this stuff!)

• Financial advisors who do tax planning

People are still processing the changes. Work with your advisor to adjust your planning accordingly.

Travis

Investment advisory services offered through Andrews Advisory Associates LLC, a registered investment advisor. This blog is not meant to give investment advice. Before investing in any advisory product please carefully read any disclosure documents, including without limitation, the firm’s Form ADVs. The information herein is provided for informational purposes only, and does not constitute an offer, solicitation or recommendation to sell or an offer to buy securities, investment products or investment advisory services. Nothing contained herein constitutes financial, legal, tax, or other advice. These opinions may not fit your financial status, risk and return profile or preferences. Investment recommendations may change, and readers are urged to check with their investment adviser before making any investment decisions.