The One Big Beautiful Bill Act introduced a new temporary deduction of $6,000 for taxpayers who are 65 years of age or older for tax years 2025 through 2028. The deduction is available whether the taxpayer itemizes or takes the standard deduction, making it universally accessible to qualifying individuals regardless of their deduction strategy. The phase-out begins at modified adjusted gross income of $75,000 for single filers and $150,000 for married filing jointly, and the deduction is partially refundable, meaning that certain taxpayers below the income threshold may receive a benefit even if they have little or no income tax liability. This deduction is separate from and in addition to the existing extra standard deduction already available to taxpayers age 65 or older, which for 2025 is an additional $2,000 for single filers and $1,600 per qualifying spouse for married filing jointly returns.
For retail and CPG business owners who are 65 or older, the senior deduction intersects with their business income in several important ways. Many operators in this age group are winding down active roles while continuing to receive substantial pass-through income from businesses they own, S-corporation distributions, partnership income from arrangements entered into years ago, or rental income from commercial property they lease to their own businesses. These income streams continue to generate tax obligations well into retirement and often well above the phase-out threshold, which means that careful income timing strategies can determine whether a particular year falls within the full-benefit range, partial-benefit range, or above the phase-out entirely.
The practical opportunity for tax advisors serving retail and CPG clients is significant and time-sensitive. The deduction is available for tax year 2025, which means it applies to returns filed in 2026 and, for clients who received extensions, returns still being prepared now. Any client who is 65 or older and falls within the income range where the deduction generates benefit should have it identified and claimed on their return. For clients who are near the phase-out threshold, income timing strategies implemented before December 31, 2026, can determine whether the full or partial deduction is available on the 2026 return.
Advisors should also evaluate the interaction between the senior deduction and other provisions. For clients who are receiving Social Security benefits, the deduction may reduce the proportion of Social Security income that becomes taxable by reducing overall modified adjusted gross income in ways that interact with the provisional income thresholds governing Social Security taxability. For clients who are also taking required minimum distributions from retirement accounts, the combined effect of RMDs, pass-through income, and the senior deduction on both federal and state tax liability requires a full income modeling exercise rather than a line-item review of the deduction in isolation.
Bottom Line: The $6,000 senior deduction is a direct benefit for retail and CPG business owners who are 65 or older and within the income phase-out range. It applies regardless of whether the client itemizes, it is available for 2025 returns being filed now, and it stacks on top of the existing senior standard deduction increase. If you have clients in this demographic and this deduction has not been discussed, the conversation should happen before the filing deadline passes.