New federal tax law, new numbers, and real money at stake. This is all about tax year 2025 income (the return you file in 2026) and how the latest changes can affect you. I’ll break down the key updates in plain English, with examples, so you know what it means for your wallet. Let’s get straight to it.

1) Standard deduction went up (2025)

This is the “no-receipts-required” flat deduction most people take on their tax return. For 2025, the standard deduction amounts are higher than ever:

Married filing jointly: $31,500

Single (and married filing separately): $15,750

Head of household: $23,625

What that means:

More of your income is shielded from tax. A standard deduction is essentially the portion of your income you don’t pay taxes on. So if you’re married filing jointly, the first $31,500 of your 2025 income is tax-free. For single filers, the first $15,750 isn’t taxed, and so on. Period. Less taxable income = lower tax bill.

In plain English, you get to subtract a bigger chunk off your income automatically, without needing to itemize or show any receipts.

Most taxpayers (over 90% of filers) choose the standard deduction nowadays. because it’s larger than what they’d get by itemizing in many cases. This 2025 increase makes that even more true. For example, in 2024 a married couple’s standard deduction was about $29,200. In 2025 it’s $31,500, which is $2,300 more they can deduct. If that couple is in the 22% tax bracket, that extra $2,300 deduction saves them roughly $506 in federal tax (because $2,300 × 22% ≈ $506).

Not bad for an automatic update!

Who benefits:

Essentially everyone who doesn’t itemize their deductions will benefit from this. W-2 earners with straightforward taxes will likely see a bit less tax withheld (or a bigger refund) because more income is untaxed now.

Retirees with pension or Social Security income also get to protect more of it from taxes. Business owners or freelancers (who report income on their 1040) benefit too, though remember this is separate from any business expense deductions—they also get this higher standard deduction on the personal part of their return.

Even if you do have a lot of deductible expenses, a higher standard deduction raises the bar that your itemized write-offs need to beat. For instance, if you’re a homeowner with mortgage interest and state taxes, you’ll need those (plus any charity, medical, etc.) to exceed $31,500 (joint) or $15,750 (single) to make itemizing worth it. This means some people who used to itemize might now just take the standard deduction because it’s gotten so high.

Bottom line: a bigger standard deduction is a win for simplicity and savings for most taxpayers.

2) New “Senior Bonus” deduction (age 65+)

If you’re 65 or older, you can claim an extra $6,000 deduction on your 2025 taxes – a big bonus for seniors. It’s basically a bonus deduction on top of everything else.

Here are the key points of the senior bonus deduction:

• Amount: $6,000 per qualifying person age 65+. So a married couple can get $12,000 extra if both spouses are 65 or older. That’s on top of the regular standard deduction and the existing smaller senior deduction (which is $1,600 each, or $2,000 if single).

  In total, a married couple over 65 could have a huge standard deduction: $31,500 + $3,200 (existing 65+ adds) + $12,000 (new bonus) = $46,700 deductible income.

  A single senior could have $15,750 + $2,000 + $6,000 = $23,750 in deductions. This is real money off your taxable income.

• You can claim it even if you itemize. Here’s the big deal: Normally, the extra standard deduction for age 65+ only helps people who take the standard deduction. But this new $6,000 “senior bonus” is available to everyone eligible, whether you itemize or not. That means even if you have a lot of itemized deductions (say high medical bills or charitable donations), if you’re over 65 you still get to subtract this $6k (or $12k) from your income in addition to your itemized deductions. In tax terms, it’s “above the line” for seniors. This could be a nice boost for older taxpayers who were itemizing anyway.

• Income limits apply (phaseout ranges). This deduction is targeted to low and middle-income seniors, so it phases out (gets gradually reduced) once your income is above a certain level. Specifically, the phaseout begins at $75,000 of modified adjusted gross income (MAGI) for single filers (and heads of household), or $150,000 for married filing jointly.

  If your income is below those thresholds, you get the full $6k (or $12k). Once you go above $75k/$150k, the bonus deduction starts to shrink. By the time a single senior’s MAGI hits $175,000 (or a couple’s hits $250,000), the bonus deduction is completely gone. In other words, fully gone at $175k single / $250k joint – high-income seniors won’t get this break. (MAGI is basically your AGI with certain adjustments; for most people it’s similar to total taxable income before deductions.)

• It’s temporary. This senior bonus is only in effect for 2025 through 2028 (four years) unless Congress extends it. So think of it as a limited-time offer for the next few tax seasons.

So, what does this mean in plain English for seniors? It means Uncle Sam is giving older taxpayers an extra tax break, likely recognizing that retirees on fixed incomes could use a little help. If you’re 65+, you can knock an additional $6,000 off your taxable income just for being in that age bracket. That could equate to maybe $600 to $1,500 in actual tax saved (depending on your tax bracket) each year from 2025–2028 — nothing to sneeze at!

Example:

Imagine John is 67, single, and has $60,000 of retirement income. He rents his home (no mortgage interest) and usually just takes the standard deduction. In 2025, he’ll get the $15,750 standard deduction, plus the regular extra $2,000 for being over 65, plus this new $6,000 bonus. That totals $23,750 off his $60k income, so he only pays tax on $36,250. If John is in the 12% bracket, this bonus saves him about $720 in tax that he would have paid prior to 2025.

Now consider a wealthier senior: Jane is 66, single, with $180,000 income. She would phase out of the bonus due to her income (over $175k), meaning she gets little or none of that $6,000 deduction. So this provision really targets middle-income seniors rather than the very high-income retirees.

Who benefits:

Obviously, taxpayers aged 65 or older are the only ones who can use this. It’s especially beneficial for seniors who itemize deductions – a group that previously got no extra break for being older. For example, a 66-year-old with a big mortgage and medical expenses might itemize $20k of deductions. Before, they just got that $20k. Now, they can itemize and subtract another $6k = $26k total.

Seniors with moderate incomes (below the phaseout thresholds) get the full benefit.

Lower-income seniors who already pay little tax may or may not fully use it (if you have very low income, part of your standard deduction might already zero out your tax liability, but this could help eliminate tax on things like part of your Social Security or a part-time job income).

High-income seniors (six-figure incomes) might see it reduced or eliminated, as noted.

Retirees drawing from IRAs or 401(k)s might want to be mindful of those phaseout thresholds. If, say, taking an extra IRA withdrawal pushes you over $150k joint and phases out your $12k deduction, you effectively face a higher marginal tax rate on that extra income. Meanwhile, seniors still working a W-2 job or running a business at 65+ get this break too (again, if their income isn’t too high). It’s essentially a little reward for older folks across the board.

3) SALT cap got a big boost (California people, listen up)

“SALT” stands for State and Local Taxes – basically the taxes you pay to your state and city, like state income tax, property tax, and sales tax (if you deduct sales tax instead of income tax). These taxes are deductible on your federal return if you itemize, but since 2018 they’ve been limited by a cap.

For the last several years, that SALT deduction cap was only $10,000 – which really hurt folks in high-tax states like California, New York, New Jersey, etc., who often pay far more than $10k in state income and property taxes.

Now, big change: The SALT deduction cap is quadrupled to $40,000 for 2025.

In other words, for tax year 2025 (and for a few years after), you can deduct up to $40,000 of your combined state and local taxes if you itemize, instead of being stuck at $10k. (Married couples filing separately get $20,000 each as their cap.) This is a huge increase that will significantly lighten the federal tax load for many in high-tax areas.

However – reality check – this only helps if you itemize on Schedule A; if you take the standard deduction, the SALT cap increase doesn’t matter for you.

There’s also a catch for high earners: a phase-down of this benefit for very high-income households.

The $40,000 cap starts to phase out once your income (MAGI) goes over $500,000 (or over $250,000 if married filing separately). By the time your income hits $600,000, the effective SALT cap is back to $10,000. In other words, ultra-high-income taxpayers won’t fully benefit from the increased cap. This phaseout works at roughly a 30% rate – meaning for each dollar over $500k, you lose about $0.30 of the additional SALT deduction. So at $600k+ income, you’re losing the full $30k extra allowance, dropping you back to the $10k cap (same as before). The idea is to give relief to upper-middle-income folks in pricey states, but not too much relief to millionaires.

And yes, this change is also temporary.

The SALT cap is set to remain higher through 2029, then revert to the old $10k limit in 2030. (In fact, the law says the $40k cap will inch up by 1% each year from 2026 to 2029, so it’ll be around $40,400 in 2026, ~$40,800 in 2027, etc., ending up about $41,600 by 2029. But $40k is the baseline for 2025.) Come 2030, it’s scheduled to drop back down to $10k permanently, unless of course Congress changes it again down the road.

Who benefits:

Primarily taxpayers in high-tax states who have state income taxes and/or property taxes well above $10k. For example, many dual-income professional families in California, New York, New Jersey, Massachusetts, etc., easily pay $20k, $30k, or more in state income tax and local property taxes combined. Under the old $10k cap, they were only able to deduct a fraction of what they paid. Now, if they itemize, they can deduct up to $40k of those taxes.

Consider a California couple making $300,000 and paying around $25,000 in state income tax plus $15,000 in property tax (total SALT = $40k).

Before: they could only deduct $10k of that, essentially eating $30k of taxes with no federal break.

Now: they can deduct the full $40k. If they’re in roughly the 32% federal tax bracket, that’s potentially up to ~$9,600 in federal tax savings for 2025 compared to prior years. That’s huge for them. Another example: a single filer in New York making $150,000 might pay about $9k NY state tax and $6k property tax = $15k SALT.

Before, they’d deduct $10k; now they can deduct the full $15k – an extra $5k deduction, which might save them around $1,100 if they’re in the 22% bracket.

Even people who weren’t itemizing might now consider it. If your SALT alone was above $10k but below the standard deduction, you might have been taking standard. With a $40k cap, some filers will find their itemized deductions now exceed the standard deduction, especially if you add in mortgage interest, charitable contributions, etc.

For instance, a single filer with $20k state tax + property tax and $5k of charitable donations now has $25k of itemized deductions – well above the $15,750 standard, so itemizing could save money. (In the past, that same person would’ve been capped at $10k SALT + $5k charity = $15k, which barely missed the standard, so they might not have bothered itemizing. Now it’s worthwhile.)

However, if you live in a low-tax state or don’t own a home (no big property tax), this change might not affect you at all. For example, someone in Florida (no state income tax) who rents will likely never hit the $10k SALT cap anyway (aside from maybe high sales taxes).

And remember, if you take the standard deduction, the SALT cap increase doesn’t help – you’d need to have enough total deductions to itemize in the first place. Many retirees with paid-off homes and moderate incomes might stick with standard deduction unless their SALT plus other deductions get high enough.

One quirk: the $40k cap is the same whether you’re single or married filing jointly (MFJ). Married couples don’t get $80k; it’s $40k per return. This was true with the $10k cap as well (it was not doubled for couples, which many felt was a marriage penalty in high-tax states).

Now at least $40k is a lot more breathing room, but a married couple with big SALT might still feel a pinch if their combined state taxes are, say, $60k (they’d still only get $40k of it). If that couple files separately, each spouse can deduct up to $20k of SALT on their own return, which in some cases could yield a better combined result – though married filing separately has other drawbacks. It’s a niche consideration for some high-income couples in places like CA/NY.

The bottom line:

If you’ve got high state income taxes or hefty property tax bills, the next few years give you a much larger federal deduction for them, potentially lowering your IRS bill by thousands. But you’ve got to itemize to get it, and very high earners (above $500k) will see this benefit scaled back or eliminated. Plan accordingly.

What you should do now

These tax changes mean it’s a good idea to take action rather than just filing on autopilot. Here are some steps to consider:

1. Check withholding (W-2 earners). Your paycheck may need a tune-up.

2. Revisit estimates (1099 / business owners). Don’t sleepwalk into penalties.

3. Decide if you’re itemizing this year. That’s the gateway for the SALT benefit.

If you’re near the income thresholds (especially seniors and $500k–$600k households), planning matters. Timing income can change the outcome.

Finally, keep in mind that many of these changes (the senior bonus, SALT cap increase, etc.) are temporary. We’ve got them for a few years, but unless extended, they will sunset. So make the most of them while they last, but don’t bank on them for the long run.

If you want, send me:

⦿ Filing status

⦿ Rough 2025 income

⦿ Property tax + state tax paid

⦿ Ages (you + spouse)

…And I’ll tell you quickly whether these changes help you a little… or a lot. I’m here to help you navigate these updates and see how much you could save.

Book a free 15-minute Cash Flow Review call and let’s make 2025 a tax-winning year for you!