2025–2026 tax changes affecting retirees: what actually changed, and what didn't

Note on figures: The specific dollar amounts in this guide — contribution limits, phase-out thresholds, IRMAA brackets, the QCD limit, and others — reflect IRS and SSA guidance current as of the date above. Many adjust annually for inflation; verify current-year amounts at IRS.gov or SSA.gov before acting on any specific number. Figures tied to scheduled future changes (the senior deduction’s 2028 sunset, the SALT cap’s 2030 reversion, the RMD age rising to 75 in 2033) are noted in the relevant sections.

What you’ll learn in this guide:

• Why one piece of legislation explains nearly every retiree-relevant tax change in 2025 and 2026
• The new $6,000 “senior bonus” deduction — and why it is not the same thing as eliminating tax on Social Security
• What changed for the estate tax exemption, the SALT cap, and charitable giving
• The retirement-account mechanics that changed: contribution limits, catch-up contributions, and QCD limits
• Why the IRMAA two-year lookback matters more than ever when sizing any of these strategies

The umbrella: the One Big Beautiful Bill Act

Almost every significant tax change affecting retirees in 2025 and 2026 flows from one piece of legislation: the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025. The Tax Cuts and Jobs Act of 2017 was set to expire at the end of 2025, which would have raised rates across the board and shrunk the standard deduction back toward its pre-2018 level. Instead, OBBBA made the TCJA’s core structure permanent, with no new sunset date: the same seven tax brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%), the larger standard deduction, and — as covered below — a substantially higher estate tax exemption.

For retirees, the practical effect is continuity: the tax-planning environment in place since 2018 simply continues, rather than resetting. One specific consequence worth naming directly: the “convert before the cliff” urgency that drove a lot of Roth conversion activity ahead of an anticipated 2026 rate increase is gone, since rates aren’t rising. That doesn’t mean conversions stopped making sense — Roth conversions in retirement: is it worth it? covers the underlying case for converting, which depends on bracket-filling and timing, not on a looming deadline. The IRS’s own summary of OBBBA provisions and the Tax Foundation’s OBBBA FAQ are both useful primary references for the legislation as a whole.

The new $6,000 “senior bonus” deduction — and why it isn’t “no tax on Social Security”

This is the single most misunderstood provision in OBBBA, and worth being precise about. For tax years 2025 through 2028 only, taxpayers age 65 and older can claim an additional $6,000 deduction ($12,000 for a married couple where both spouses qualify), on top of the existing standard deduction (or available to itemizers too). It phases out at a rate of 6 cents per dollar of modified adjusted gross income above $75,000 (single) or $150,000 (joint), fully phasing out around $175,000/$250,000. The IRS’s plain-language explainer covers eligibility in full.

What this deduction is not: a repeal of tax on Social Security benefits. During the 2024 campaign, eliminating taxes on Social Security was widely discussed, but OBBBA does not contain that provision — the longstanding rules determining how much of a Social Security benefit is taxable (based on “combined income,” covered in How Social Security benefits are taxed) are completely unchanged. The senior deduction is a general deduction available to anyone 65 or older, regardless of whether they receive Social Security at all, and it doesn’t change the Social Security taxation formula in any way. A Congressional Research Service brief on this exact distinction notes that this confusion has a real downstream risk: someone who mistakenly believes Social Security is now tax-free might make a larger Roth conversion than they otherwise would, not realizing the conversion itself can make more of their Social Security benefit taxable under the unchanged formula — exactly the kind of compounding effect a tax professional should model before converting any meaningful amount.

The estate tax exemption, made permanently higher

Beginning January 1, 2026, the federal estate and gift tax exemption rises to $15 million per individual ($30 million for a married couple, with portability), up from roughly $14 million in 2025. Unlike the TCJA’s original exemption increase, this one has no sunset provision — it’s now a permanent feature of the tax code unless a future Congress changes it, and it’s indexed for inflation starting in 2027. The Arnold & Porter summary of the OBBBA estate and gift tax changes covers the mechanics, including that the generation-skipping transfer tax exemption rises in parallel but, unlike the estate exemption, is not portable between spouses.

For the vast majority of households — well under the $15 million threshold — this doesn’t change anything about whether federal estate tax applies (it didn’t before, and still doesn’t). What it does change is the planning math for the small number of larger estates that were previously closer to the threshold, and it removes the “lock in gifts before the exemption drops back down” urgency that existed under the prior law’s scheduled 2026 sunset. The step-up in basis at death — generally the single most valuable provision for an average retiree’s heirs — is unaffected and remains fully intact. Inheritance tax considerations and tax-friendly approaches covers step-up in basis and state-level inheritance tax (a separate, smaller-scale concern in a handful of states) in more depth.

SALT cap: a real but temporary and capped increase

The cap on deducting state and local taxes (SALT) — capped at $10,000 since 2018 — rises to $40,000 for 2025, with a small annual increase through 2029 ($40,400 in 2026), before reverting to $10,000 in 2030 unless extended again. The increased cap phases out for taxpayers with MAGI above $500,000 (2025) / $505,000 (2026), with anyone above the full phase-out point capped at the original $10,000. This matters specifically for retirees who itemize deductions and live in higher-property-tax or higher-state-income-tax states — for someone taking the standard deduction, the SALT cap is irrelevant either way. CNBC’s coverage of the new cap covers practical scenarios where itemizing now becomes worthwhile again for households that switched to the standard deduction after 2018.

Charitable giving: a new deduction for non-itemizers, and new limits for itemizers

Two changes here cut in different directions, both effective 2026:

• A new deduction for non-itemizers. Taxpayers who take the standard deduction can now also deduct up to $1,000 (single) or $2,000 (joint) in cash donations to qualifying public charities — an above-the-line deduction that didn’t exist before. It doesn’t apply to gifts to donor-advised funds or private foundations.
• New limits for itemizers. Itemized charitable deductions are now only deductible above a 0.5% of AGI floor, and the value of the deduction is capped at 35% for taxpayers in the top 37% bracket — both reduce the benefit of charitable itemizing for some higher-income filers compared to the pre-2026 rules.

Qualified Charitable Distributions (QCDs) — direct transfers from an IRA to a qualifying charity, available starting at age 70½ and a particularly efficient strategy for anyone subject to RMDs, since the distributed amount isn’t included in taxable income at all — remain untouched by either of the above changes, and the annual QCD limit rises to $115,000 per person in 2026, up from $108,000 (this limit adjusts annually for inflation — verify the current year’s amount at IRS.gov before making a distribution). Because a QCD reduces income directly rather than functioning as a deduction, it isn’t affected by the new floor or cap on itemized giving, which keeps it one of the more durable, broadly-useful strategies in this list regardless of how the rest of someone’s giving is structured.

Retirement account mechanics: contribution limits and catch-up rules

A few numbers retirees and near-retirees should have current, not from a prior year: for 2026, the 401(k) elective deferral limit rises to $24,500, the standard age-50+ catch-up rises to $8,000 (for a combined $32,500), and the “super catch-up” for ages 60–63 remains at an additional $11,250 on top of the base limit (for a combined $49,000) — a provision that came out of the 2022 SECURE 2.0 Act, not OBBBA, but stays relevant for anyone in that specific four-year age window. IRA contribution limits remain $7,500, with the IRA catch-up rising slightly to $1,100. All contribution and catch-up limits adjust annually — the IRS’s retirement contribution limit table has current-year figures. One rule worth flagging for higher earners still working: anyone earning more than $150,000 in the prior year must make any 401(k) catch-up contribution as a Roth (after-tax) contribution, not pre-tax — a rule that doesn’t apply to IRA catch-up contributions. RMD age remains 73 for now; it’s scheduled to rise to 75 starting in 2033, a separate SECURE 2.0 provision unaffected by OBBBA.

Why the IRMAA lookback makes timing more important than ever

None of the above changes Medicare’s income-related monthly adjustment (IRMAA) directly, but it’s worth naming as the constraint that ties all of this together: IRMAA uses a two-year income lookback, applies per person, and operates as a hard cliff rather than a gradual phase-in — a single dollar over a bracket threshold triggers the full surcharge for the entire year, for both spouses if married. Because the senior deduction, a larger SALT deduction, and any Roth conversion strategy all move a retiree’s MAGI in the same calculation, sizing any one of them without checking the IRMAA impact two years out is a genuinely common, avoidable mistake. IRMAA: when Medicare costs more because of your income covers how the bracket structure and lookback work in detail — worth reading alongside any of the strategies above, not after the fact.

Where to get help applying this to your own numbers

Several of these provisions interact with each other in ways that are easy to get wrong without actually running the numbers — the senior deduction’s phase-out, a Roth conversion’s effect on Social Security taxation, and IRMAA’s two-year lookback all touch the same MAGI figure simultaneously. A CPA or fee-only financial planner who can model a specific household’s multi-year projection is in a much better position than any general guide to say what combination of these provisions actually applies, and how to sequence decisions (a conversion, a charitable gift, a SALT-driven itemizing decision) across years rather than evaluating each in isolation.