Bruce Lorenz, a financial advisor at Bolden, breaks down three 2025 tax changes for retirees: a new $6,000 senior deduction for those 65+, enhanced retirement catch-up contributions of 150% for ages 60-63, and a raised SALT deduction cap of $40,000 through 2029. These could reshape decisions around Roth conversions and income timing.
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Hey everybody, I'm Bruce Lorenz, a financial advisor here at Bolden. Today we're going to talk about three new tax laws that affect your taxes in 2025. You know, you think about the fall and come winter coming on, we have some yard work to do. Right. Every year we need to rake the leaves, we need to bring in the garden hoses, we need to cover the air conditioner. Yep. Minnesota, we do not run the air conditioner all winter. There are some standard things we do with taxes every year as well. But then there are some new things that pop up this year. Number one is the senior deduction. That's a deduction that you receive if you are 65 years or older. It's $6,000 per individual, $12,000 per couple. Now there are some phase out ranges. For individual that's $75,000 of income phasing out at 175,000. For married couples, that range starts at 150,000 and phases out at $250,000. Again, it's a senior deduction that's available whether you itemize or not. Number two, this is an extra catch up amount for your retirement plan contributions. If you turn 60, 61, 62 or 63 in 2025, that extra catch up amount is 150% of the regular catch up amount. Let's break that down. Your standard contribution limit this year is, is 23,500. That would go to your 401k, your 403b, your 457 or ATSP. The extra or the catch up amount. The normal regular amount is 7,500 this year. So if we add that to the 23,500, we would get 31,000. However, if you are one of those ages we just mentioned 60 to 63 this year you can do 150% of that 7,500. So 7,500 times 150% is $11,250. Adding that to your standard contribution of 23,500 gives you a total retirement plan contribution that you could deduct of $34,750. This is part of the Secure Act. And so that is a permanent change of course. Permanent means until there's another change. Number three, this is the SALT deduction. That's the state and local tax deduction. That limit has been increased to 40,000. That $40,000 cap is scheduled to be in place from 2025 through 2029 and then to revert on a permanent basis in 2030 back to 10,000 again, permanent until future changes. So with all of these different deductions we've talked about, this might be an opportunity for you to pull income from 2026 into 2025. Maybe you were thinking of doing a Roth conversion, which would increase your income. You now have these additional deductions that could offset that Roth conversion. So, again, when you think about your money, it's great to save some, to spend some and to give some. Thanks, everybody.
