Signed into law Dec. 22, 2017, the Tax Cuts and Jobs Act (TCJA) — informally known as the Trump tax cuts — contained a number of changes to individual tax rates that are set to expire after 2025. Barring congressional action, tax rates for 2026 will revert to the rates payers were subjected to before the change.
Retirees, most of whom are on relatively fixed incomes, were less affected than others when the TCJA was introduced because the changes didn’t affect how Social Security and investment income were taxed.
However, all seniors are once gain going to have to reassess their spending and tax returns and face new financial decisions when standard, estate tax and charitable contribution deductions revert to pre-TCJA levels on January 1, 2026.
By nearly doubling the standard deduction and restricting many itemized deductions for state and local taxes, the TCJA resulted in millions of taxpayers shifting to the standard deduction.
For 2023 federal income tax returns (to be filed in April 2024), the standard deduction amounts are $13,850 for single and married filing separately individuals, $27,700 for those married filing jointly and qualifying widow(er)s — and $20,800 for heads of household.
If you are at least 65 years old or blind, you can claim an additional 2023 standard deduction of $1,850 (also $1,850 if using the single or head of household filing status). If you’re both 65 and blind, the additional deduction amount is doubled.
The TCJA made it possible for many retirees to skip the complicated process of itemizing deductions and potentially reduce taxable income greatly (at the expense of the previous $4,050 personal exemptions, which did the same). However, a reduced standard deduction starting after 2025 will significantly alter how much Americans will be able to claim, regardless of age.
Estate Tax Deductions
The estate tax exemption jumped considerably in 2017, allowing taxpayers with sizable estates to benefit when transferring property to heirs. The Trump tax plan more than doubled the lifetime estate tax deduction from the 2017 value of $5.49 million for individuals up to $11.18 million. This higher limit, which allows property-holding families to transfer more money tax-free to their heirs, has increased each year since 2017.
For seniors currently benefiting from this deduction, the limit swells to $12.92 million in 2023. In 2026, the estate tax deduction will either return to the 2017 amount or be amended — depending on who ends up controlling the White House and Congress after the 2024 presidential election.
Charitable Contribution Deductions
By increasing the standard deduction and limiting itemized deductions, the TCJA had some adverse effects on charitable contributions. Charitable organizations are a major source of assistance to low-income seniors, so the potential reduction of this tax benefit may have impacted many retired individuals and non-profits.
Although the amount of charitable contributions that can be deducted has been increased from 50% of adjusted gross income (AGI) to 60%, a significant number of taxpayers who would normally itemize charitable donations has been reduced in favor of those using the standard deduction option (as a result of the TCJA, 87.3% of taxpayers claimed standard deductions in 2018, per the IRS).
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