How the OBBBA Affects Your Retirement Planning

The One Big Beautiful Bill Act (OBBBA) changes retirement planning by giving retirees a temporary new tax deduction, making today’s lower tax brackets permanent, raising the SALT deduction cap, expanding education and healthcare write-offs, and increasing the estate tax exemption.

For retirees and near-retirees, it all adds up to: lower short-term taxes, a bigger window for planning Roth conversions and withdrawals, and fresh opportunities to fine-tune charitable and legacy strategies.

What you’ll learn in this post

• How the new $6,000 senior deduction could make more of your Social Security tax-free
• Why permanent lower brackets make Roth conversions and withdrawal planning easier
• What the new SALT cap means, and why higher earners need to watch the phase-outs
• How charitable giving rules changed, and how to use them wisely
• Expanded 529 plan and healthcare deductions that touch multigenerational and self-employed retirees
• What the $15 million estate exemption means for legacy planning
• Which provisions expire vs. which stick around
• How Correct Capital uses RightCapital to model these changes in real time

1. A New Senior Deduction Could Lower Your Social Security Taxes

Starting in 2025, taxpayers age 65 and older can take an extra $6,000 deduction ($12,000 for couples). For many middle-income retirees, this means more of your Social Security benefits will be shielded from federal tax.

The catch:

• The deduction runs only through 2028.
• The deduction phases out as income rises — for single filers it starts phasing out at $75,000 of Modified Adjusted Gross Income (MAGI) and disappears completely at $175,000. For married couples filing jointly, the phase-out begins at $150,000 MAGI and is gone by $250,000.

Planning move: During those years, watch your income closely. Smart timing of withdrawals or conversions can keep you under the phase-out and maximize the benefit.

2. Lower Tax Brackets Are Now “Permanent”

The tax brackets we’ve had since 2017 were set to expire in 2025. OBBBA removed that expiration date, so the 12%, 22%, and 24% brackets stay put.

Why that matters:

• More confidence when planning Roth conversions or withdrawals.
• Easier to map long-term income without worrying about an automatic tax hike in 2026.

Remember, “permanent” just means no built-in expiration. Congress can still change things later, but for now, you’ve got stability.

3. SALT Deduction Relief (With Limits)

The cap on deducting state and local taxes (SALT) rises to $40,000 for many households — a big win if you live in a high-tax state.

But here’s the fine print:

• The expanded cap starts phasing out once income passes $500,000 Modified Adjusted Gross Income (married filing jointly or single).
• It’s fully phased out by $600,000 MAGI — meaning you’re back to the old $10,000 cap at that point.
• After 2029/2030, the SALT cap expansion is scheduled to expire and drop back down.

Planning move: If your income is in the $500k–$600k range, be cautious with large Roth conversions, asset sales, or other spikes in income. They could erase the SALT benefit and raise your tax bill.

4. Charitable Giving Rules Shift

OBBBA added two important changes for givers:

• Starting in 2026, non-itemizers can deduct up to $1,000 ($2,000 married) in cash gifts to charities.
• Also in 2026, itemizers face a new 0.5% Adjusted Gross Income floor, meaning the first sliver of donations each year isn’t deductible.

Impact: Small donors get a break, big donors need to plan. It may be worth bunching gifts into certain years, or pairing charitable giving with Qualified Charitable Distributions (QCDs) from IRAs after age 70½.

5. Estate Exemption Jumps in 2026

The federal estate and gift tax exemption rises to $15 million per person in 2026 (double for couples). That’s a huge expansion of how much you can transfer tax-free.

Still:

• State estate and inheritance taxes can still apply.
• Laws can change again — flexibility matters.

Planning move: Even if you’re under the new threshold, review your estate plan, trusts, and beneficiary designations while the rules are favorable.

O6. ther Useful Tweaks

529 plans: More expenses qualify starting July 2025, including tutoring and credentialing costs — helpful for grandparents funding education.

Self-employed Medicare deduction: Freelancers and consultants can now deduct Medicare premiums (Parts B, D, Advantage, supplements) even if they take the standard deduction. That’s a real tax saver for retirees without employer coverage.

Timing Your Income Still Matters

7. The OBBBA didn’t make timing less important. If anything it’s more important.

• Use the senior deduction years (2025–2028) to take withdrawals or Roth conversions at lower cost.
• Spread conversions across several years to avoid SALT phase-outs or Medicare surcharges.
• Use charitable strategies like QCDs to keep taxable income low.

At Correct Capital, we use RightCapital planning software to map these thresholds year by year, so you can see the trade-offs before you make a move.

What’s Temporary vs. Permanent

Temporary: Senior deduction (2025–2028), SALT relief (through 2029/2030).

Permanent: Lower brackets, new non-itemizer charitable deduction, higher charitable AGI limit.

2026: Estate and gift exemption jumps to $15 million.

Need Help Understanding What The OBBBA Means For Your Retirement? Call Correct Capital Today

The OBBBA gives retirees some near-term tax relief and long-term planning opportunities. The senior deduction, SALT relief, and charitable write-offs can reduce your taxes in the next few years, while permanent lower brackets and a bigger estate exemption create more certainty for Roth conversions, withdrawals, and legacy planning.

You don’t have to memorize every rule. With the help of a financial advisor, you can line up your income, gifts, and withdrawals with the new windows. To see how the OBBBA affects your plan, contact Correct Capital Wealth Management to start the conversation. You can give us a call 877-930-4015, contact us online, or schedule a meeting with a member of our advisory team today.