Ep. 172 | The New Senior Tax Deduction
Download MP3Welcome back to the podcast, everybody. Episode one seventy two today. We are looking at the new senior tax deduction. So as you probably heard in previous episodes, really what we're focusing on a lot here in '26 naturally is a lot what's been previewed to us in '25. So again, this one is very similar to other topics we've touched as it is a byproduct, if we wanna call it that, of the one big beautiful bill act or OB three, OB three a, all kinds of acronyms around it.
John Tripolsky:But today, again, specifically, we're gonna look at the new senior tax deduction. And as always, Chris Pacquero, my cohost with the mostess or hostess with the mostess, however it goes. Welcome back, sir. What's happening?
Chris Picciurro, CPA:Oh, it's good to be back. You know what? Just triggered, John. We might have to do section one seventy nine for episode one seventy nine. Could be a good podcast.
Chris Picciurro, CPA:Good idea.
John Tripolsky:You don't always come up with good creatures. I'm just kidding.
Chris Picciurro, CPA:After, yo, taking you behind the curtain, we just talked about, podcast what what we're gonna be doing for the next x amount of podcasts off, obviously, off record. And then this just popped in my head when you I didn't realize we're on a section one or a section. Episode one seventy three already. But it is crazy. We've been doing this for for for quite a few years.
Chris Picciurro, CPA:Wow. And but it's an honor to be part of the community here at teaching tax flow and this podcast. We're gonna talk about the senior deduction. I like to call it the mature age deduction. It's a little softer.
Chris Picciurro, CPA:But the senior deduction, this is a result of, like John said, o b three. Now remember during the election of twenty twenty four, it was about that we would have no tax on Social Security. That sounded really sexy, didn't it? Unfortunately, that wasn't gonna happen. Right?
Chris Picciurro, CPA:Social Security system is is completely separate from the, US tax system even though your self employment tax is collected on your federal tax return if you're self employed. And, both sides of the aisle had to come together to compromise on something, almost like, John, when you say, you know, you have a well, you have a daughter. Right? Sometimes you sometimes you you tell your child, hey. We're gonna go get out for ice cream.
Chris Picciurro, CPA:You get to the ice cream shop. It's closed. And then you're like, oh, great. I guess we'll give her a piece of candy or something to keep her happy or him or her. So this is the piece of candy.
Chris Picciurro, CPA:It's not the ice cream shop. But it's
John Tripolsky:Having a child's a lot like politics. Pardon? Maybe. I said having a child is is a lot like politics maybe.
Chris Picciurro, CPA:Yeah. You It is kinda like politics. I mean, you're the rule maker. It's just a you know? But sometimes you gotta compromise with your constituents.
Chris Picciurro, CPA:Right? You gotta keep them in mind. So so this production came from it, and they said, alright. Well, let's give let's give seniors an additional deduction on their tax return. We're gonna give this to them for the tax years 2025 through 2028.
Chris Picciurro, CPA:So this is a temporary tax deduction. Depending on the result of the next couple elections, it could be made permanent. It could go bye bye. So, yeah, that's what it is. Now let's talk about who's gonna qualify.
John Tripolsky:Remember beat me to the punch. I was gonna say before we get into it, let's define exactly what it is, especially, you know, if people like yourself that are getting closer. Yeah. To to this. And as everybody that's listening, I say that because I'm ten years younger than him.
John Tripolsky:So I have my entire life to give him crap about this, and he can't do anything about it.
Chris Picciurro, CPA:This is true. Although I did get now eligible for that Heinz ketchup. Heinz, you should be a sponsor also. The Heinz ketchup contribution for retirement plan. I get to pound down those Centrum Silvers and compete in the senior division of most pickleball tournaments at 50 years old.
Chris Picciurro, CPA:I'm not gonna get the senior deduction. I would take it if they wanna give it to me, though. I'd happily accept it, and I'd accept the nomination on behalf of another senior.
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Chris Picciurro, CPA:So what is this temporary deduction? This is a federal tax deduction for anyone that is at the end of the year 65 years or older. The cool thing about this deduction is that it you can take this deduction even if you don't itemize your deductions. So if you take the standard deduction, this is this could be an additional standard deduction. So at age 65 or older, you get a $6,000 deduction.
Chris Picciurro, CPA:Now if you are 65 and you robbed the cradle and your wife's only 62, you get a $6,000 deduction. Yet if you are a married couple and both of you are 65 and older, then you could get up to a $12,000 deduction. So both spouses can qualify for this deduction. $6,000 per senior taxpayer, maximum of $12,000 if the couple is married. Remember, this is in addition to the standard deduction.
Chris Picciurro, CPA:So it the standard deduction is pretty generous. I think it's over $30,000. Probably shouldn't go off top of my memory on that.
John Tripolsky:Was However Something says, like, $32.08 for me, but I I'm probably wrong, but somewhere like that.
Chris Picciurro, CPA:And this begins in the twin on the 2025 tax return. So those filing a return in '26, yay, you get an extra deduction. So if your income, and withholdings were the same as the last year and you qualify for this deduction, you're either gonna owe less money on your return or you're gonna get a higher refund. So eligibility criteria. The first piece of eligibility criteria, as I mentioned, you have to be 65 or older at the end of the year.
Chris Picciurro, CPA:So if your birthday's on January 1 and you turn 65 January 1, hey. Happy belated birthday. Birthday. But you're not getting it for that twenty twenty five year. You're gonna get it in the 2026 year.
Chris Picciurro, CPA:You have to have a valid Social Security number. So that is interesting. Right? Because what if someone is a US tax resident, but they have an I 10, they could be married to someone that is a US tech that is a US citizen with Social Security number. So you have to have a Social Security number, the age of 65 and older, and you have to have a eligible filing status.
Chris Picciurro, CPA:Okay. What the heck does that mean? Right? That means single, had a household, or married filing jointly. Married filing separately, taxpayers do not qualify for this deduction.
Chris Picciurro, CPA:So there used to be this concept before tax cuts and jobs act primarily called the marriage penalty. Now we're talking about taxes, everyone. If you took that the wrong way, leave a comment on our YouTube, and we can direct you to a marriage counselor. Probably. I don't know.
Chris Picciurro, CPA:Sure. We have one in the audience. Right?
John Tripolsky:Yeah. I don't I if they think that's a real thing, they might need a lot more help than a couple sit down sessions.
Chris Picciurro, CPA:Well, you know, John, when I'm playing my favorite sport with just pickleball, we haven't mentioned pickleball in a little bit.
John Tripolsky:No. But now you mentioned it, I think, four times in one episode. Sitting where you're making up for it. You're good.
Chris Picciurro, CPA:And if you drive a ball right down the middle, I call that divorce alley. Right? Because because it goes right between both players. They both look at the ball thinking the other one's gonna get it. And, usually, we just say, divorce alley, call the counselor.
Chris Picciurro, CPA:Now when you're playing a married couple, gets really interesting and dicey. But, you know, as long as you stay it in fun, I think everyone understands, oh, dang it. That one
John Tripolsky:went right away. That happens, you know, playing a married couple, I'm sure you you can clearly identify who wears the pants of the relationship as the person who just goes anyways. We won't go down we won't go
Chris Picciurro, CPA:down that road. Depends on, yeah, who where the position of the players were, who's forehand side. Are they both forehand sides? Bottom line is, if you play too much pickleball together and you file separately from your spouse, you are ineligible for this deduction. Sorry.
Chris Picciurro, CPA:So consider filing together for tech. Now there are reasons you wouldn't file together, but I'm just saying from a pure deduction standpoint, you have to file together as if you are married. Now there are phase outs. Okay? Oh gosh.
Chris Picciurro, CPA:Phase outs. Most deductions, have phase outs. And what a phase out means is that, hey. The government says, you know what? You're mature aged.
Chris Picciurro, CPA:You've survived sixty five years in this crazy world. We're gonna give you an additional deduction. But guess what? We're gonna put you on Santa's bad list if you make too much money. So for married filing jointly, the phase out begins at a $150,000 of modified adjusted gross income.
Chris Picciurro, CPA:So that's kind of a modest phase out. Single, it begins at 75,000. Now remember, if you're in this situation, many of these taxpayers are also drawing some Social Security income, which could be affected by your retirement plan distributions. So folks, remember, marginal tax rate is more important than a tax bracket. Tax brackets lie to us.
Chris Picciurro, CPA:So be aware of these phase outs. At about $250,000 of income for a married filing joint couple, you are pretty much completely phased out of this deduction, meaning you'll get nothing. So it phases out as your adjusted gross income increases. Now that's different than what we call a cliff. And not cliff from cheers, John.
Chris Picciurro, CPA:You know, with your beard, I don't know. You can't you have a young person
John Tripolsky:to I gotta find a stool to sit on. Wasn't he the one that kinda was slumped over a little bit always with his elbows, like, up on the bar? Is that the guy?
Chris Picciurro, CPA:That might be Norm. No. He was the he was the mailman.
John Tripolsky:Oh, that's who I'm thinking of. Okay.
Chris Picciurro, CPA:Yeah. But, anyway, a cliff means that if you go $1 over a threshold, you get deduction. So phase outs are usually a little more friendly than a cliff. So there is a phase out single. Phase out begins at $75, ends at $1.75.
Chris Picciurro, CPA:Married joint, phase out begins at $1.50, and ends at about $2.50. So lots and lots of people we feel millions and millions of people we feel are going to be eligible for this temporary deduction. Hey. This sounds great. Sign me up.
Chris Picciurro, CPA:Guess what? We're gonna tell you how.
John Tripolsky:Yeah. And really with this one too, Chris, which is a little different than other ones, even though there's clips and phase outs that we've mentioned a lot, this one I feel like is pretty it's much more clear, easier to read than some of the other ones that we've talked about in other episodes, right, where I feel like there's not as many variables in this one. This is pretty defined. Like Correct. It's not it's not hard to con it's not easy to confuse this.
Chris Picciurro, CPA:Let's put it that way. The the confusing part, though, is figuring out your modified adjusted gross income that when you're in this situation and if you're drawing Social Security, it could be bouncing around like a like a pogo stick. You know? So that's where we've got a factor. And and so for instance, if you've got medical expenses, well, that's a that's a deduct that could be an itemized deduction, but that doesn't reduce your adjusted gross income, which would make you eligible for the senior deduction.
Chris Picciurro, CPA:So, again, marginal tax rate, that's the truth. Tax brackets lie to us. So how do you take this? Yep. Like I said, this sounds great.
Chris Picciurro, CPA:Sign me up. Well, the IRS came out with a new schedule one a. Now, John, we did a special podcast episode on this very schedule. I don't remember what number it is.
John Tripolsky:One sixty, I believe.
Chris Picciurro, CPA:Wow. It's been that long. Okay.
John Tripolsky:Yeah.
Chris Picciurro, CPA:We're really on top of things. The schedule one a is the is the form that you de take the senior deduction. That schedule one a gets attached to your form ten forty, your federal tax return, and bada boom. Remember, you don't have to itemize your deductions to take the senior deduction. Now I mentioned this is a federal tax deduction.
Chris Picciurro, CPA:Right? You're going to have to look at your state and determine if there's something called state tax conformity. Obviously, there are some states that don't don't tax have an income tax at all. There are some states that use your federal taxable income as their number. There are some states that use your adjusted gross income.
Chris Picciurro, CPA:There are some states that use some type of modification. So talk to your tax professional and figure out, am I benefiting at the state level at all from this new deduction? And this deduction can give you opportunity. So let's say you're eligible for the entire deduction. You're age 66.
Chris Picciurro, CPA:You have retirement plan assets, and you are going to have required minimum distributions in the future, pairing this deduction with either Roth conversions or IRA distributions that are not taxable can be a very nice blend. So, again, I hate for these deductions to go to waste. So if you're someone that's a senior that's paying almost little tax now and eligible for this deduction, you might want to be what we call in our teaching tax law system, a green diagnosis and accelerate some income and put some income into a year where you're matching it with this deduction.
John Tripolsky:And I know you always get nervous when I say, oh, I have a question for you. You're probably like, oh, here he goes again. So two things with this that I was just thinking of as we're going through this. Right? So is this a deduction, or would it even matter that some years you might take it, some years you might not opt out of it?
John Tripolsky:Like, walk us through that a little bit, but then also is the say somebody is DIY ing their tax returns.
Chris Picciurro, CPA:Mhmm.
John Tripolsky:Say they're like, hey. I have the quote unquote. I'm gonna do the air quotes and tell people that listen to air quotes. I'm gonna say simple, because there's never such thing, tax return. And they say, oh, I do my own.
John Tripolsky:Awesome. Great. Now I know about this. Is this something that they're gonna see right in their face, or is this something that they're gonna really have to know exists like we're talking about in order to take advantage of it? How does that look for somebody?
Chris Picciurro, CPA:I would say that if you're if you're somebody that is using a reputable DIY software, software. As long as you put your date of birth in correctly, which again, the date of birth, you could have fat fingers, but the wrong date of birth in, you know, and and back of the direction. But as long as you put the right date of birth in, then then it will it it will calculate this deduction properly. So Excellent. It's you don't elect in.
Chris Picciurro, CPA:It's not like bonus depreciation or our section one seventy nine, our future episode where you have to elect in or elect out of. You just get it if you if you're eligible. Now that lends to another question, though. If you're DIY ing the return and you get the deduction, the question is is did you use it to its best benefit? Are you really offsetting a decent amount of tax?
Chris Picciurro, CPA:And could you potentially recognize additional income and pay almost no tax? But, yeah, to answer the question, you're going to if you're DIYing your tax return and you're using reputable software, you're going to trigger this deduction as long as your data entry is correct.
John Tripolsky:Awesome. Awesome. Well, I'm glad we touched on this one. And, you know, anybody that's listening or watching this too, I I believe Chris had mentioned it three, maybe four times in this somewhere, maybe two. The explaining what a tax professional is.
John Tripolsky:Right? And I think, again, and I I shouldn't say I think, I believe and I know. This is, again, probably the at least one of the top five episodes and topics we've touched on where by working with somebody else, you have I know you mentioned it opportunity in there a few times. If we could, like, capitalize that verbally and, like, put it bold somewhere, we would. I know with working through a tax pro and this is me.
John Tripolsky:Right? I'm a marketing guy, Chris. You're a tax pro. Been doing this a long time. You know all this stuff.
John Tripolsky:Even though I do these podcasts with you, we do a lot together in teaching tax flow. I I I literally learn everything something from every conversation we have around this. So it is physically impossible that the average taxpayer knows all this stuff. Why you say that? Right?
John Tripolsky:Working with a tax professional, you might look at it, and I'm speaking to the the taxpayers here. You might look at it as, oh, I don't wanna spend that much or, oh, I can do it myself to save money. But the likelihood of you missing out on some huge opportunities is probably pretty high, and you're in the long run, it's more expensive not to do it than it is to work with one and not to put crits on a pedestal or just tax pros as a whole, but they are extremely valuable. And we've had topics on picking those too. So Sure.
John Tripolsky:Absolutely. And, yeah, Chris, this is again, this is a great one.
Chris Picciurro, CPA:I'm glad you
John Tripolsky:threw this topic on the roster because, again, I wouldn't have thought of this one. We put it on here, and we got some good ones coming up too. Right? Got some good topics.
Chris Picciurro, CPA:Got some good yeah. Absolutely. I have some great topics coming up. So definitely, you know, become more involved in the teaching tax tool community if you're not already. We'd love to see you in our defeating taxes private Facebook group.
Chris Picciurro, CPA:It's really hard to find. Defeatingtaxes.com. You could post anonymously, and and then comment. Yo. We're seeing a a big uptick in comments in in on our YouTube channel, and we love it because your feedback helps us figure out what content we should lean into.
Chris Picciurro, CPA:So we appreciate it.
John Tripolsky:Absolutely. And as we get into February here now, everybody, I'm gonna throw that quote out that I think I pulled it out maybe about a month, month and a half ago. So we're getting up to another deadline, likely the the most popular tax deadline around that April 15. Gonna read it off my board here past the camera. Procrastination makes easy things hard and hard things harder.
John Tripolsky:So don't wait till the last minute to explore all the stuff that we talk about here. So don't be lazy is really what I'm trying to say. Get on that defeatingtaxes.com. If you're here on YouTube, awesome. Welcome.
John Tripolsky:If you're not watching this on YouTube, you can look at the, the costume that Chris is wearing today and then check it out. And then when you get there, you'll laugh and realize what I'm actually telling you. So that's your call to action to actually get on YouTube and watch these and subscribe to the channel. So as we wrap this one up, as always, we will see everybody back here again next week on the Teaching Taxable podcast. Have a great week, everybody.
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