On July 4th, a major piece of tax legislation was signed into law—and if you’re retired or nearing retirement, these changes could have a significant impact on your financial future. We put together this Cardinal Lesson to help simplify the key provisions that matter most to people age 65 and older.
Instead of digging through a 500-page bill, we’ve focused on what affects your taxes, deductions, retirement income, and estate plan—so you can plan ahead with clarity and confidence.
The Big Picture: What Stayed the Same
The most important takeaway? The current tax brackets have been extended beyond 2025. That means the historically low rates of 12%, 22%, and 24% will remain in place, rather than reverting to higher pre-2018 levels in 2026 as originally scheduled. For many retirees, this is a major planning opportunity—especially for those considering Roth conversions or other taxable income strategies.
Higher Standard Deductions—And a New One for Seniors
If you’re 65 or older, your standard deduction is increasing, and now there’s an additional $6,000 deduction available—$12,000 for married couples—on top of that. But there’s a catch: this new deduction phases out if your income exceeds $75,000 (single) or $150,000 (married). So if you’re doing Roth conversions, that extra income could reduce your eligibility for this new benefit.
We’ve already started working this into our planning software because this deduction—while temporary—is valuable for the next few years.
Estate Tax Exemption Extended
The estate and gift tax exemption was scheduled to drop back down to around $7 million per person in 2026. With this new law, it’s increased to $15 million per person starting in 2025—making estate taxes irrelevant for most of our clients. However, state-level estate or inheritance taxes may still apply, depending on where you live.
Other Key Changes Retirees Should Know
- State and Local Tax (SALT) Deduction Cap Raised: From $10,000 to $40,000—but only if you itemize, and only within certain income limits.
- Charitable Giving Incentives: Standard deduction filers can now deduct up to $2,000 ($1,000 if single) for charitable contributions starting in 2026. Good news if you don’t itemize.
- Auto Loan Interest Deduction: Up to $10,000 deductible for vehicles assembled in the U.S., with income limits of $100,000 (single) and $200,000 (married).
- 529 Plan Expansion: Funds can now be used for K–12 education and some trade programs, offering more flexibility for grandparents helping with school expenses.
- ACA Subsidy Rollback: Subsidies for early retirees on ACA health insurance will be reduced starting in 2025, increasing out-of-pocket costs for many.
What This Means for Your Retirement Plan
This tax law affects nearly every part of retirement planning—your income, deductions, tax brackets, Roth strategy, and estate plan. While some provisions are permanent (like the bracket extension), others are temporary and phase out in just a few years.
If you’re doing Roth conversions, drawing retirement income, gifting to family or charity, or planning your estate, now’s the time to revisit your strategy and adjust accordingly.
Need Help Making Sense of the Numbers?
This law adds complexity—but also opportunity. At Cardinal Advisors, we specialize in helping people 65 and older navigate these kinds of changes. Whether you want to reduce your tax burden, optimize your income, or prepare for the next generation, we’re here to help.
Watch the full Cardinal Lesson video and download our free show notes at CardinalGuide.com.
Or give us a call at 919‑535‑8261. We’ll walk you through how this applies to your personal plan.
