OBBB tax changes retirees shouldn鈥檛 overlook
The One Big Beautiful Bill (OBBB) Act introduced several provisions aimed at businesses and individuals. Many of these provisions have direct implications for those in retirement or nearing retirement.
Here is an overview of key OBBB tax changes and potential planning opportunities:
OBBB social security deduction
One key provision of the OBBB introduces a temporary, nonrefundable Social Security deduction for taxpayers aged 65 or older. The deduction is up to $6,000 for single filers and $12,000 for married couples filing jointly, available from 2025 through 2028.
However, the deduction begins to phase out for adjusted gross income (AGI) above $150,000 for joint filers and $75,000 for single filers — meaning it’s unlikely to apply directly to many high-income retirees.
OBBB car loan interest deduction
The OBBB introduced a new tax benefit allowing individuals to deduct interest paid on car loans for personal-use vehicles. This deduction is available from 2025 through 2028 and is especially beneficial for retirees or individuals who may not typically itemize deductions.
Taxpayers can deduct up to $10,000 in annual interest paid on qualifying car loans. The deduction is above the line, meaning it can still reduce taxable income for taxpayers taking the standard deduction.
To qualify, the vehicle must be new and used for personal purposes only, and it must be assembled in the United States.
The loan itself must be a first lien loan secured by the vehicle and originated after December 31, 2024. Refinancing is allowed, but only up to the original principal and only if the vehicle remains the collateral. Loans from related parties are not eligible.
The deduction begins to phase out at a modified adjusted gross income of $100,000 for single filers and $200,000 for joint filers.
Section 529 plan gifting strategies
With the OBBB Act’s recent enhancements, contributing to a 529 plan for a grandchild or other loved one has become an even more powerful legacy and tax planning tool for retirees.
The expanded definition of qualified educational expenses now includes not only college costs but also certain K-12 tuition and post-secondary credentialing programs. The OBBB Act increased the annual limit for K-12 529 account distributions from $10,000 to $20,000 starting in 2026. This means your gifts to a grandchild’s 529 can support a broader range of educational paths — from private elementary school to technical certification.
Retirees can use these plans for multigenerational wealth transfer, reduce the size of their taxable estate and potentially benefit from favorable state tax treatment on contributions.
The earlier you contribute, the greater the growth potential. And by front-loading up to five years’ worth of annual gifts, you can jumpstart a grandchild’s educational journey while efficiently managing your own taxable income.
Above-the-line charitable contribution deduction
The OBBB Act introduces a valuable new opportunity for retirees who claim the standard deduction, especially those living in states with low or no income taxes and who may seldom itemize.
For tax years beginning in 2026, individuals can now deduct up to $1,000 (or $2,000 for married couples filing jointly) for qualified charitable contributions — all without itemizing. This above-the-line deduction lowers your adjusted gross income, potentially unlocking further tax benefits and even reducing future IRMAA surcharges on Medicare premiums.
For retirees seeking to maximize the impact of their giving while keeping tax complexity low, this provision enables more flexible, targeted philanthropy — all while preserving eligibility for other tax credits and deductions commonly used in retirement income planning.
Strategies for reducing AGI
To help you take advantage of some of these new OBBB tax opportunities, consider these strategies to reduce AGI:
- Reduce future RMD’s by completing Roth conversions: Spreading Roth conversions over multiple years shortly after retirement may lower AGI in future years as you can reduce your required distributions once you hit RMD age.
- Qualified charitable distributions: Individuals can leverage qualified charitable distributions (QCD) to reduce the taxable impact of required minimum distributions (RMDs) from retirement accounts like traditional IRAs. The annual QCD limit for 2025 is $108,000.
- Non-taxable bonds: Investing in non-taxable bonds can provide retirees with steady, tax-free income while preserving capital and reducing overall tax liability. Non-taxable bonds can also help generate reliable cash flow without increasing taxable income.
- Tax loss harvesting: Selling stocks when they are in loss positions will help reduce capital gains from other sales and can offset ordinary income up to $3,000.
Your next steps
As you plan for how to respond to the new OBBB tax provisions, consider the following action steps:
- Senior deduction: Project your AGI for 2025-2028, plan IRA withdrawals, QCDs and other taxable income to maximize the deduction.
- Car loan interest: Buy or finance a U.S.-assembled car after 2024 to use the new deduction; avoid related-party loans.
- 529 plan contributions for grandkids: Contribute early, consider front-loading gifts and review state tax benefits for broader educational expenses.
- Above-the-line charity deduction: Organize your giving to claim up to $1,000 (single) or $2,000 (joint) without itemizing.
How Wipfli can help
At Wipfli, we’re committed to helping our clients make the most of every tax provision — big or small — through thoughtful, strategic planning. Reach out today to learn more about how we can support your financial goals for today and tomorrow. You can also get the latest OBBB news on our policy updates page.
Explore our private client servicesJoin our upcoming webinar “What the One Big Beautiful Bill means for you” to learn more about critical OBBB tax changes and how you can maximize new opportunities. Visit our event page to see more details and register today.
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