Who benefits from the added $4,000 standard deduction?
Posted on May 23, 2025

The tax bill has passed the House will likely pass in the Senate. That bill provides an added $4,000 standard deduction for a single filer over age 65 who does not exceed $75,000 MAGI. That’s an $4,000 added to the $2,000 that single filers over 65 get now. (It would be $8,000 added for married, joint filers with MAGI less than $150,000; they already get $3,200 added standard deduction.) Who is this going to help? I’m assuming that you get the full credit if your MAGI does not exceed the limit stated, meaning I’m not assuming that the deduction scales with income to its maximum.

 

 

== NOT help ==

 

More Standard Deduction is NOT going to help the ~60% of taxpayers over age 65 on Social Security who do not pay tax on Social Security. They pay no tax on Social Security because their benefit is roughly average – about $22,000 per year – and their added work income or distributions from their traditional IRA is less than half their gross Social Security benefit: the math works out that almost none of their Social Security is taxed. Outside income for almost all these folks is less than the standard deduction – $17,000 for a single filer in 2025. Almost all these folks pay no federal income tax now.

 

== Help ==

 

1. It’s going to help middle income folks over age 65 who receive above-average gross SS benefit – more than $22,000 per year – who work or distribute enough from their traditional IRA such their other income is more than half their Social Security benefit. They are hit with the tax on their added income and on a significant percentage of their Social Security benefit. They pay federal income tax, and the added $4,000 directly lowers their taxable income. Most of their benefit will in the 22% marginal tax bracket or pay $880 less tax.

 

This roughly equates to all non-working retirees who have roughly UP TO $1 million in their traditional IRA. If they have $1 million, they are distributing roughly $45,000 per year or about 150% of their gross SS benefit. Distributions at this level drive the taxable percentage of their SS benefit to 85%, and they almost surely reach $75,000 MAGI.

 

That math doubles for married, joint filers. Those with with UP to $2 million in traditional IRAs benefit save $1,760 in tax.

 

2. It’s going to help far wealthier taxpayers (clearly multi-millionaires) over age 65 who delay Social Security.

 

A single filer not on Social Security could distribute roughly $75,000 from their traditional IRA (depending on the amount of interest, dividend and capital gain income). That means the added deduction benefits folks with UP TO $2 million in their traditional IRA. The $75,000 that they distribute places them in the 22% marginal tax bracket. The added $4,000 deduction means $880 less tax. This is another modest, added incentive for retirees with very health traditional IRAs to delay taking Social Security.

 

That math doubles for married, joint filers. Those with UP TO $4 million in traditional IRAs benefit, saving $1,760 in tax.

 

 

Conclusion: The new tax bill that is destined to pass has a provision of an added $4,000 standard deduction for single filers over age 65 with income (MAGI) less than $75,000. This $4,000 is in addition to the added $2,000 that single filers over age 65 gets now.

 

This post generally describes who this will benefit: it’s not the ~60% of folks over 65 who don’t pay tax on Social Security. It benefits a fairly large portion of tax payers on Social Security with meaningful traditional IRAs. The math works out to roughly UP TO $1 million in traditional IRAs for a single filer. It also benefits a smaller set of retirees who delay the start of SS benefit; those single filers with with traditional IRAs up to roughly $2 million will benefit.