Andrew Keshner
The new temporary tax break ‘makes a good idea even better,’ according to one financial planner.
The senior bonus deducts up to $12,000, but you can use the break to get much more in tax savings, financial planners say.
President Trump’s One Big Beautiful Bill Act included an enhanced tax deduction worth up to $12,000 for seniors. Now that the bill is law, some financial planners are putting the tax break to a different use – and the strategy could make it worth a lot more.
They are using the temporary “senior bonus” deduction to give clients extra wiggle room to transform more of their retirement savings into tax-free money for the long term.
It’s a real window of opportunity, said Eric Cooper, founder of Sooner Private Financial Council in Salem, N.H.
Cooper has long talked to his clients about converting before-tax retirement savings to after-tax savings in a process called a Roth conversion. Yet the new deduction is adding extra justification for the maneuver in the coming couple years, he said: “This makes a good idea even better.”
The stakes are high for seniors to make the most of the tax break while it’s around. Older Americans on fixed incomes face rising costs, particularly for healthcare. Pressure on Social Security’s trust funds add to the uncertainty. And it’s all happening while many people are living longer – so minimizing costs is a serious matter for seniors.
The senior bonus will help a majority of Cooper’s clients who are at least age 65 and striving to minimize the taxes they have to pay over their lifetimes, he said.
Like several other new tax breaks, the senior bonus applies to the 2025 income-tax returns that will be filed early next year. The bonus runs through 2028.
Lawmakers crafted the deduction to lighten the tax burden of seniors with fixed incomes and higher medical costs, said Michael Levy, a partner at accounting firm Crowe’s tax group.
Nevertheless, “there’s nothing in the law that restricts how that deduction interacts with other planning strategies like Roth conversions,” Levy noted. So while it wasn’t specifically crafted to accelerate Roth conversions, Levy said using the tax break for that goal “is very much in line with normal tax planning, where we look at all deductions and credits to manage marginal tax brackets over time.”
The side use of the senior-bonus deduction is another reminder of the extra tax complexity that’s coming for Americans as the One Big Beautiful Bill Act reshapes the tax code. The law is dotted with new chances to reap tax savings, but it’s filled with income rules and temporary time frames. Understanding the intricacies – and then applying them to a person’s circumstances – takes some homework. Here’s what to know.
How’d we get here?
First, there’s the long-running tactic of switching before-tax retirement savings to after-tax money that sits in Roth IRA accounts.
The idea is to take the tax hit now on the wager of avoiding more taxes later. What could fuel the move is an estimate that someone may have more taxable income later in life, or that taxes will rise in future years. When converting the money, the sum counts as ordinary income and the owner has to pay tax on the switched amount.
The “entire premise is short-term pain for long-term gain,” said Devin Carroll, owner and lead advisor of Carroll Advisory Group. The extra deduction is reducing that short-term pain, he observed.
Though someone can perform a Roth conversion at any point, Carroll said there may be a “golden runway” between the time a person stops working and when they are required by the IRS to start tapping their tax-deferred retirement accounts.
“That golden runway is when you have the most control of taxable income,” Carroll said. One challenge with a Roth conversion is the prospect of getting pushed to a higher tax bracket as the money switches over. Advisers try to smooth these tax spikes with a conversion by reducing taxable income elsewhere.
So what reduces taxable income? Deductions – which is exactly what seniors are getting here.
Though the new tax break has sometimes been dubbed as “no tax on Social Security,” Carroll emphasized it’s not an income-tax exemption for Social Security payments.
The senior-bonus deduction goes to taxpayers ages 65 and over and is worth up to $6,000 for an individual and $12,000 for a married couple. The full deduction goes to taxpayers with $75,000 or less in modified adjusted gross income, or $150,000 for married couples.
For people who take the standard deduction, the bonus is on top of the additional standard deduction for taxpayers age 65 and up. For 2025, that’s $1,600 for individuals or $3,200 for a married couple over age 65. (Itemizers can also claim the senior-bonus deduction.)
In essence, if senior citizens are bracing for a tax bill with a Roth conversion, planners like Carroll and Cooper say the extra bonus is giving them more ability to take the sting out of that tax hit. “This gives them the ability to go harder, faster,” Cooper said.
So how does it work?
A stripped-down hypothetical can illustrate the point: Suppose a married couple has $100,000 in adjusted gross income, and now they want to switch $10,000 from a traditional IRA to a Roth IRA.
In the first instance, the couple has no credits and deductions to claim except this year’s standard deduction and the additional standard deduction for senior citizens. In that case, Carroll said their federal income tax bill would be $8,540.
Now layer on the senior bonus: The same household seeking to convert $10,000 now faces a $7,100 tax bill, Carroll said. That would be $1,440 less paid to the IRS.
The upshot is it’s cheaper to convert – and that gives savers the ability to do more. “We are effectively being able to convert more dollars,” Carroll noted.
The ROI on using the senior bonus for money now vs. later
To be sure, a Roth conversion isn’t a clear-cut yes for every household. Depending on circumstances, a person’s future taxable income may be lower. In that case, they’d potentially be paying more taxes over their lifetime by doing a Roth conversion. What’s more, a conversion might usher higher Medicare premiums, depending on their individual circumstances.
Anyone weighing a Roth conversion has a lot to consider, even with the bonus deduction’s arrival, said Matthew Hofacre, founder of Pay It Forward Financial Planning. Income thresholds for the tax break may limit its help for savers trying to convert large chunks of money. The deduction will not cushion the tax hit “if you go too big,” he said.
“It’s just another layer of complexity in the decision-making process,” said Hofacre, who’s eyeing how – or if – the extra deduction will factor into his clients’ 2026 financial strategies.
The phaseout range for the bonus deduction is $75,000 to $175,000 for individuals. For married couples, the range is $150,000 to $250,000, as H&R Block notes.
More than ever, it’s worth running the numbers on a Roth conversion with a planning expert and weighing the pros and cons, according to Carroll: “The benefits have to outweigh the cost.”
For the next several years, the senior bonus may be altering the analysis.
The bonus deduction is written to lop $6,000 or $12,000 from a household’s yearly taxable income. It’s possible a Roth conversion boosted by the extra senior bonus could generate a larger return on investment.
Once the money is converted, Cooper said it’s ready to grow tax-free in the future. “The ROI of this decision compounds basically forever after the decision is made, until after the money is spent,” Cooper said.
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-Andrew Keshner
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11-22-25 0900ET
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