2025 Tax Changes for Seniors: What’s New and How It Impacts You

The Annual Certainty: Inflation Adjustments for 2025

Every year, the IRS adjusts key tax figures to account for inflation. While we await the final numbers, we know these key areas will be adjusted upwards for 2025, which is good news for taxpayers.

A Bigger Standard Deduction for Seniors

The standard deduction is set to increase. For 2024, a single senior (age 65+) had a standard deduction of $15,700. Expect this number to be higher for 2025, allowing you to shield more of your income from tax without having to itemize.

Wider Tax Brackets

The income thresholds for each federal tax bracket will also expand. This helps protect you from “bracket creep,” where inflation pushes your fixed income into a higher tax bracket even though your real purchasing power hasn’t increased.

The Big One for 2025: New, Higher Catch-Up Contributions

A major provision of the SECURE 2.0 Act is scheduled to take effect in 2025, offering a significant new tax-saving opportunity for older workers.

Special Catch-Up for Ages 60-63

Currently, workers age 50 and older can make an extra “catch-up” contribution to their workplace retirement plan. Starting in 2025, individuals ages 60, 61, 62, and 63 will be able to make an even larger catch-up contribution. This amount will be the greater of $10,000 or 150% of the regular catch-up amount for that year.

This is a powerful tool to supercharge your retirement savings in your final working years while significantly lowering your taxable income for 2025.

Roth Catch-Up Rule for High Earners

Another change to be aware of: If you earn more than $145,000, the law will eventually require all your catch-up contributions to be made on a Roth (after-tax) basis. While this rule’s implementation has been delayed by the IRS, it’s a key part of the new landscape.

Other Important Updates and Reminders for Seniors

Required Minimum Distribution (RMD) Age Reminder

The RMD age remains 73 for those turning 73 in 2025. It’s crucial to take your full RMD from your traditional retirement accounts to avoid a stiff penalty. If you turned 73 in 2024, your first RMD was due by April 1, 2025, and your second is due by December 31, 2025. Plan accordingly for this “double” income year.

Energy Credits are Still Going Strong

The valuable tax credits for energy-efficient home improvements (like new windows, doors, and insulation) and residential clean energy property (like solar panels) continue to be available in 2025. These can be a great way to lower your tax bill if you’re making upgrades to your home.

How to Prepare for These 2025 Tax Changes Now

• Talk to Your Employer: If you are age 60-63 and still working, ask your HR or benefits department how they are implementing the new, higher catch-up contribution for 2025.
• Review Your Withholding: With all these changes, your tax liability may be different. Consider doing a “paycheck checkup” using the IRS Tax Withholding Estimator to ensure the right amount is being withheld from your pension or Social Security.
• Meet with a Professional: A mid-year tax review with a qualified tax advisor or financial planner can help you take full advantage of these new rules and adjust your strategy for the remainder of the year.