Oh Baby, 6000 single and 12000 Married filing jointly

[audreyh1]

Time for a mea culpa. I usually try to be a bit more careful before spewing numbers on this (or any) forum, but much has changed for me recently. All in the space of a few weeks I'm turning 65:, starting a new pension, starting Medicare (with associated IRMAA costs) and now the new tax law hits with various implications for those of my new age.

All this means my strategy for Roth conversions will be changing and I haven't yet determined exactly what's best for me. While I regret making the erroneous comments earlier, the responses have been useful in shaping my thinking. Thanks.

The good news is that you still have almost half the year to figure it out! But yes, quite complex overall.

 

[pb4uski]

Poster was correct. Federal income taxes paid on SS go back into the SS Trust Fund. It's a specific line in the SS Trust Fund financial report.

I stand corrected. Federal income taxes on the up to 50% of SS that is taxed goes into the SS Trust Fund. For taxes collected on between 50% and 85% go into the Medicare Hospital Insurance Trust Fund. New to me.

 

[audreyh1]

I stand corrected. Federal income taxes on the up to 50% of SS that is taxed goes into the SS Trust Fund. For taxes collected on between 50% and 85% go into the Medicare Hospital Insurance Trust Fund. New to me.

Wow, didn’t know that.

 

[zl55lz]

So, to clarify:

The $30,000 standard deduction has been increased to $31,500 for MFJ, effective for 2025.

The extra $3200 for those 65+ and MFJ still applies for 2025 (subject to future year increases).

The new $12000 MFJ deduction for those 65+ applies for the 2025-2028 tax years.

So the total deduction for those 65+ and MFJ is $46700 (non-itemized) as of tax year 2025.

Is this correct?

 

[SecondCor521]

So, to clarify:

The $30,000 standard deduction has been increased to $31,500 for MFJ, effective for 2025.

Correct. They can also itemize if it is more favorable to do so.

The extra $3200 for those 65+ and MFJ still applies for 2025 (subject to future year increases).

Correct, assuming neither is blind.

The new $12000 MFJ deduction for those 65+ applies for the 2025-2028 tax years.

Correct, assuming AGI under $150K. It phases out at at 12% rate up to $250K.

So the total deduction for those 65+ and MFJ is $46700 (non-itemized) as of tax year 2025.

Is this correct?

Correct, with the comments noted above.

 

[Cobra9777]

Correct. They can also itemize if it is more favorable to do so.
Correct, assuming neither is blind.
Correct, assuming AGI under $150K. It phases out at at 12% rate up to $250K.
Correct, with the comments noted above.

Thanks. Question... I've been reading that the $12K can be deducted even if one itemizes. With the $40K SALT cap, itemization might make sense again if I bunch my property tax every other year. So, I'm thinking the SD threshold I need to beat is $31,500+$3,200=34,700. (MFJ, both 65+) Is that right?

 

[Koolau]

Old people getting all the good stuff. I can't wait until I get old!

Trust me, it's not worth it for a few $grand in tax savings - but the savings are nice to have.

 

[Gumby]

Thanks. Question... I've been reading that the $12K can be deducted even if one itemizes. With the $40K SALT cap, itemization might make sense again if I bunch my property tax every other year. So, I'm thinking the SD threshold I need to beat is $31,500+$3,200=34,700. (MFJ, both 65+) Is that right?

I have been contemplating the exact same metric, and I believe you are correct.

 

[NomDeER]

2025-2028, inclusive.

I'm one of the early retirees who is not yet an older retiree, so this does nothing good for me.

What is the reasoning behind making this tax break and making it temporary?

And yes the keeping of the current tax rates does help everyone, but more so the upper class.

Yes, the rich benefit a lot. But, I'm not convinced that everyone will benefit. A spike in the deficit will have to be paid for eventually. By someone. So, I doubt that young people who aren't currently making much (or aren't even in the workforce yet) are going to benefit from this.

 

[Texas Proud]

So, to clarify:

The $30,000 standard deduction has been increased to $31,500 for MFJ, effective for 2025.

The extra $3200 for those 65+ and MFJ still applies for 2025 (subject to future year increases).

The new $12000 MFJ deduction for those 65+ applies for the 2025-2028 tax years.

So the total deduction for those 65+ and MFJ is $46700 (non-itemized) as of tax year 2025.

Is this correct?

I think that is if BOTH are over 65... some here have younger spouse...

 

[TheWizard]

I think that is if BOTH are over 65... some here have younger spouse...

Some here are single nowadays as well...

 

[SecondCor521]

Thanks. Question... I've been reading that the $12K can be deducted even if one itemizes. With the $40K SALT cap, itemization might make sense again if I bunch my property tax every other year. So, I'm thinking the SD threshold I need to beat is $31,500+$3,200=34,700. (MFJ, both 65+) Is that right?

Yup, for 2025, assuming neither is blind.

Aside: the $12K is a personal exemption, not a deduction. Although the language in the bill calls it a deduction, it's in the portion of the law related to personal exemptions. But whether you call it an exemption or a deduction, they both get subtracted from AGI to get to TI, so it's sort of just a technicality.

 

[audreyh1]

What is the reasoning behind making this tax break and making it temporary?

As far as I can figure this is kind of a back door way of reducing taxes on those receiving SS income even though it applies to anyone 65+, to overall reduce the number of people paying taxes on their SS income. Why is it temporary? Perhaps to limit the effect on long term debt? That’s usually why things are made to sunset.

 

[EastWest Gal]

What is the reasoning behind making this tax break and making it temporary?

The stated reason is to allow Congressional oversight and review.

The tax law passed in 2017 had a lot of temporary provisions that were set to expire next year. The CARES act got rid of the ACA cliff. The ACA cliff returns next year. The stated reason was that presumably the Covid pandemic would be improved, if not gone, by the end of 2025. But it also extended beyond a presidential election year, as did the tax law passed in 2017 (to get through presumably an 8 year presidency). So these temporary provisions expire at the end of 2028, after the next presidential election. I fear the reason for these various expiration dates is political, not pragmatic.

 

[NomDeER]

As far as I can figure this is kind of a back door way of reducing taxes on those receiving SS income even though it applies to anyone 65+, to overall reduce the number of people paying taxes on their SS income. Why is it temporary? Perhaps to limit the effect on long term debt? That’s usually why things are made to sunset.

But, they are enacting other tax breaks on a permanent basis, some of which have a bigger impact on the debt and benefit wealthier people.

The stated reason is to allow Congressional oversight and review.

I'm not sure why this wouldn't apply to other tax breaks that are permanent.

But it also extended beyond a presidential election year, as did the tax law passed in 2017 (to get through presumably an 8 year presidency). So these temporary provisions expire at the end of 2028, after the next presidential election. I fear the reason for these various expiration dates is political, not pragmatic.

I guess it will help certain politicians with the mid-terms, but that's not a great reason for a tax-break, IMO.

They may just end up extending it for political reasons, and then it will apply to me. (But, of course, that will mean more national debt.)

For my own financial planning, I'll assume that I will not be getting the tax break.

 

[shotgunner]

To put things in perspective. Using my 2024 earnings and taxes I would have saved $2434.40 if SS was not taxable. With the extra $6000 deduction I would have saved $720 instead. I am thankful none the less, as they say something is better than nothing but what might have been and what materialized are pretty far apart. My life goes on.

 

[audreyh1]

As far as I can figure this is kind of a back door way of reducing taxes on those receiving SS income even though it applies to anyone 65+, to overall reduce the number of people paying taxes on their SS income. Why is it temporary? Perhaps to limit the effect on long term debt? That’s usually why things are made to sunset.

But, they are enacting other tax breaks on a permanent basis, some of which have a bigger impact on the debt and benefit wealthier people.

That’s not really a but. There are tons of tax breaks in the bill. Maybe that’s why it’s considered so big and beautiful.

As most bills this has in it what it took to pass, and this one just barely passed - by the skin of its teeth.

 

[COcheesehead]

I stand corrected. Federal income taxes on the up to 50% of SS that is taxed goes into the SS Trust Fund. For taxes collected on between 50% and 85% go into the Medicare Hospital Insurance Trust Fund. New to me.

So when I have withholding on our SS checks, it covers our overall tax liability, but doesn’t go to the general fund?

 

[pb4uski]

So when I have withholding on our SS checks, it covers our overall tax liability, but doesn’t go to the general fund?

I think the withholding goes to the general fund but later the portion that represents the taxes that you pay on any SS income is transferred from the general find to the SS Trust Fund and, if applicable, the Medicare Hospital Insurance Trust Fund.

 

[aaronc879]

And yes the keeping of the current tax rates does help everyone, but more so the upper class.

My income is under the standard deduction so nothing in the bill helps me. There is potential it could hurt me but i'm not sure yet. Definitely doesn't help in any way.

 

[Dtail]

My income is under the standard deduction so nothing in the bill helps me. There is potential it could hurt me but i'm not sure yet. Definitely doesn't help in any way.

Yeah should have said anyone who already pays taxes.

 

[pb4uski]

My income is under the standard deduction so nothing in the bill helps me. There is potential it could hurt me but i'm not sure yet. Definitely doesn't help in any way.

Do you have any tax-deferred money? Are you over 59-1/2? If yes to both do some withdrawals to avoid letting any of the standard deduction go to waste.

 

[Dtail]

Do you have any tax-deferred money? Are you over 59-1/2? If yes to both do some withdrawals to avoid letting any of the standard deduction go to waste.

I know he is not over 59.5

 

[levindb]

Do you have any tax-deferred money? Are you over 59-1/2? If yes to both do some withdrawals to avoid letting any of the standard deduction go to waste.

Actually, this would be a great time to do Roth conversions if you do not need the funds within the next 5 years. No taxes due now and no taxes on future growth within the Roth IRA.

 

[pb4uski]

+1 but it is situational. I have a retired friend whose only income is SS and income from a rental, but the rental is minor income or loss after expenses and depreciation. Since he isn't a taxpayer to begin with and never will be, he does annual withdrawals calibrated so he doesn't have to pay tax on them.

He could do Roth conversions but he prefers just having 2 accounts (tax-deferred and taxable) rather than 3 accounts (tax-deferred, taxable and Roth).