This month, we’re examining a key feature of H.R.1 that directly affects Vermont seniors: enhanced tax relief through the standard deduction and special senior provisions. These changes could alter how older Vermonters plan, file, and manage retirement income over the next several years.
What’s New for Seniors Under H.R.1?
For tax years 2025 through 2028, taxpayers 65 or older may claim an additional $6,000 deduction on top of their standard (or itemized) deductions. This benefit applies to each eligible individual – including both spouses if filing jointly – and begins phasing out at higher income levels:
Single filers: phased out starting at $75,000 MAGI (eliminated above about $170,000)
Married couples filing jointly: phased out past $150,000 (eliminated above $250,000)
Also beginning in 2025, the already generous TCJA standard deduction amounts will increase slightly and become permanent. The 2025 standard deductions will be:
Single filers: $15,750
Head of household: $23,625
Married filing jointly: $31,500
Who Benefits and Who Doesn't
While attractive on paper, the additional deduction won’t benefit many low-income seniors who already fall below the enhanced standard deduction threshold. Because Social Security income is often partially or fully excluded from taxable income, many such taxpayers already pay no tax – even without this provision.
Still, the law may succeed in eliminating federal tax on Social Security for a large share of older Vermonters. Up to 88% of Social Security recipients are projected to owe no federal tax on those benefits due to these shifts, up from about 64% today.
Sunset Provisions & Bigger Picture
It’s crucial to note that the senior deduction is temporary – expiring after 2028 – unlike the permanent standard deduction increases. This means that it is essential for seniors to plan now while the benefit lasts.
On the flipside, to pay for these cuts, H.R.1 includes massive budget cuts to Medicaid and SNAP, likely affecting many older Vermonters who rely on these programs. These funding cuts to healthcare could indirectly raise out-of-pocket costs, resulting in unexpected expenses.
Planning Tips for September
Estimate your taxable income as soon as possible to know if you can benefit from the additional senior deduction.
Reassess Medicaid and SNAP eligibility – changes to deductions may affect benefit calculations.
Review withdrawal strategies to understand the best timing and methods of drawing from IRAs or taking Social Security benefits.
Bottom Line
H.R.1 delivers meaningful – but targeted – tax relief for many seniors in Vermont. Seniors with income in the moderate range have the greatest upsides, and may experience sizable tax relief in 2025-2028. But for others, especially low-income seniors or fixed-income retirees, the benefits may be minimal, and some may experience loss or reduction in other social benefits due to budget cuts. And with the sunset set for 2028, this deduction is best viewed as a temporary window to plan wisely – not a permanent lifeline.
At Angolano & Company, we’re helping seniors and their families evaluate whether this deduction benefits them – and how to adapt before it expires. Contact us today to schedule a review of your tax strategy – let's make sure you're positioned well now and prepared for the future.