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Retirees face a dramatically altered tax landscape in 2025 following the passage of the One Big Beautiful Bill Act (OBBBA), with changes affecting everything from state and local tax deductions to Roth conversion strategies and estate planning.
Tax expert Bob Keebler, a partner with Keebler and Associates, warned that while some changes offer significant opportunities, others create pitfalls that could cost retirees thousands if not properly navigated.
The sweeping legislation extends well beyond simple tax rate adjustments, creating a complex web of phaseouts, deductions, and strategic planning opportunities that require careful coordination with qualified tax professionals, Keebler said in a recent Decoding Retirement podcast.
He recommended meeting with a qualified CPA well before year-end, when tax professionals become overwhelmed with tax return preparation.
“Every time you pull one lever, another lever moves,” Keebler said. “We have to be super disciplined and use our software, not use Excel spreadsheets to figure everything out, because the Excel spreadsheets will never catch all these nuances.”
The state and local tax (SALT) deduction lets taxpayers deduct certain state and local taxes from federal taxable income — but only if they itemize rather than take the standard deduction.
Under the OBBBA, the SALT cap jumps to $40,000 this year from $10,000 last year. That’s a big increase, and it requires careful planning.
“You don’t want to have $60,000 this year and $20,000 next year,” Keebler said. “That would be silly. It would be better to push everything over the $40,000 into next year if that’s possible under local law.”
Read more: Standard deduction vs. itemized: How to decide which tax filing approach is right
A phaseout for higher earners adds another wrinkle. Once income exceeds $500,000, the $40,000 cap begins to shrink, dropping back to $10,000 at $600,000 of income.
“That journey from $500,000 of AGI [adjusted gross income] to $600,000 causes your income to actually go up by $130,000 because you lose that $30,000 deduction,” Keebler said. “So if you’re in that situation, you want to do everything possible to get your income back below $500,000.”
More broadly, Keebler suggested most retirees consider a bunching strategy for itemized deductions, as the standard deduction is now indexed to inflation and is projected to climb to record levels — about $32,200 for married couples in 2026 (up from $31,500 in 2025).
“A lot of people should still itemize every two or three years,” Keebler explained.
The key driver, he noted, is charitable giving, because that’s the lever retirees can most easily control. You might make a large contribution to a donor-advised fund in year one, he explained, then rely on that fund to distribute charitable gifts in years two and three, before repeating the process in year four.
Close-up of the documents of the One Big Beautiful Bill Act (OBBBA), a budget reconciliation bill in the 119th United States Congress. ·hapabapa via Getty Images
While Roth conversions remain a valuable strategy under the new permanent tax rates, Keebler warned that they’ve become significantly more complex due to multiple phaseouts built into the legislation.
He recommended testing your Roth conversion against each of those phaseouts to see how it affects other aspects of your tax return.
“Test on a small incremental basis,” Keebler advised. “I convert $20,000: What’s going to happen to my SALT deduction? What’s going to happen to my senior deduction? Will that $20,000 impact my IRMAA payment?”
IRMAA, or income-related monthly adjustment amount, is a surcharge added to the standard monthly premiums for Medicare Part B and Medicare Part D prescription drug plans.
It applies to higher-income beneficiaries and is based on their modified adjusted gross income (MAGI) from two years of prior tax returns. The IRMAA payment varies based on income brackets, with individuals falling into higher brackets paying a greater surcharge
“What we don’t want to do with IRMAA is stick our big toe over the line, meaning we go $100 over with a Roth conversion, and suddenly our premium goes up by $150 to $200 a month — times two if both spouses are on Medicare,” Keebler said. “So it’s very important to test all that.”
Read more: How do Roth IRA taxes work?
The legislation also adds a new $6,000 deduction for seniors ($12,000 for married couples) that stacks on top of the standard deduction or itemized deductions.
But the deduction begins phasing out once modified adjusted gross income (MAGI) exceeds $150,000.
That means retirees now face an extra layer of tax planning. Decisions such as selling securities, taking IRA distributions, or making Roth conversions could inadvertently push income over the $150,000 threshold — reducing or even eliminating this valuable benefit.
“We want to make sure we’re staying below that $150,000 starting point,” Keebler said.
Got questions about retirement? Email Robert Powell at [email protected], and we’ll do our best to answer it in a future episode of Decoding Retirement.
Each Tuesday, retirement expert and financial educator Robert Powell gives you the tools to plan for your future on Decoding Retirement. You can find more episodes on our video hub or watch on your preferred streaming service.
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