Obbb 2025 senior

[TracyS1]

The calculation seems incorrect for those MFJ  over 150k. With both spouses over 65.   In TurboTax it took the total combined of both spouses and subtracted 150k  = (a) .  Took 6% of that (a) number = (b).  It then took 6000 -b to get c.  It multiplied c times 2 to get additional deduction.    Shouldn’t it take b from 12,000?    It is using combined income of both spouses should it not reduce from 12000?   Thanks 

[xmasbaby0]

The “senior deduction” is added automatically by the software based on the date of birth and filing status you entered into MY INFO.  You do not need to take any extra steps to enter it.

2025 STANDARD DEDUCTION AMOUNTS

SINGLE $15,750  (65 or older/legally blind + $2000)

MARRIED FILING SEPARATELY $15,750  (65 or older/legally blind +1600)

MARRIED FILING JOINTLY $31,500  (65 or older/legally blind + $1600)

HEAD OF HOUSEHOLD $23,625 (65 or older/legally blind + $2000)

For 2025 through 2028 there is an extra  deduction amount of up to $6000 per individual 65 or older filing Single, MFJ, or HOH which is phased out for taxpayers with modified adjusted gross income over $75,000 for single filers and $150,000 for joint filers.

The $6,000 senior deduction will be calculated on 1040 Schedule 1-A page 2 Part V Enhanced Deduction for Seniors which goes to 1040 line 13b. It is separate and in addition to the Standard Deduction or your Itemized Deductions on 1040 line 12e.  Turbo Tax automatically includes it.

IRS Schedule 1-A
https://www.irs.gov/pub/irs-dft/f1040s1a--dft.pdf

[TracyS1]

Yes I understand that.  Did you understand my question?   I said the way it is being calculated is incorrect for 2 seniors with income over 150k.  6% deduction should be reduced from 12000 not from  6000 and multiplied by 2.  

[VolvoGirl]

Are you both over 65?  On a joint return the phaseout is calculated separately for each person, so the 6% phases out for each spouse.   Are you not seeing it this way?  What is your AGI?  I made a spreadsheet.  

[golfperfect1]

I think TracyS1 is correct. Based on the OBBB provision, those who are married filing jointly and have MAGI over S150,000 have their total 12,000 senior bonus reduced at an accelerated rate since the 6% reduction is stacked on each taxpayer. So, If the joint income is 180,000, there is an overage of 30,000 (180,000 minus 150,000 equals 30,000).

That overage is multiplied by 6% (30,000 x .06 = 1,800). That 1,800 is then subtracted from each taxpayer's 6,000 bonus, leaving each with only 4,200. The total reduced deduction is then only 8,400 instead of 12,000. 

The accelerated reduction continues until, at 250,000, the bonus disappears.

[TracyS1]

Thank you. Yes we are both over 65.   It seems inconsistent to me.  They take combined income  and calculate 6 % reduction on total overage 150,000 for MFJ but breakup deduction to 2 6000 instead of reducing from combined 12,000.    There is quite a difference in calculation.  Between 2 different ways.  

[TracyS1]

Thank you . Why isn’t 1800 reduced from 12000.   The 6% deduction is taken from combined income why isn’t deduction of 1800 taken from combined possible deduction of 120000

[RogerD1]

Schedule 1-A is the IRS form that is used to calculate the Enhanced Deduction for Seniors in Part V.  The form is here:  Schedule 1-A.

Line 31 of the form uses your income - in your case $180,000

Line 32 is the beginning of the phaseout range - for you $150,000

Line 33 is line 32 minus line 31 or $30,000

Line 34 you multiply line 33 by 0.06 which is $1800

Line 35 you subtract line 34 from $6,000 to get $4,200

Line 36a is line 35 if you are 65 or older - or $4,200

Line 36b is 0 if you are single or is the same as line 36a if you are married filing jointly and your spouse has a valid SSN - in your case this would also be $4,200

Your enhanced deduction for seniors is the sum of line 36a and 36 which would be $8,400

So if your senior deduction is calculated at $8,400 for an income of $180,000, then it is correct.

[5bsagreen]

Same question.  I called in and couldn’t get anywhere reporting it as incorrect.  We both qualify, birthdates are corrected online.  We are in the phaseout range (over 150,000, but less than 250,000).  Calculated the amount over the threshold and it is taking that amount twice off of 12,000.  

[VolvoGirl]

@5bsagreen   Sorry, This is a common misunderstanding.  If you are both over 65  and in the phaseout amount,  the 6% reduction is subtracted from EACH spouse's 6,000 effectively making it 12%.

It is phased out for EACH spouse.  Fill out Sch 1-A yourself and see.  It's pretty easy.  Then why would they even have 2 lines 36a and 36b for spouse on Schedule 1-A?

IRS Schedule 1-A
https://www.irs.gov/pub/irs-pdf/f1040s1a.pdf

See IRS instructions for 1040 line 110
https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

[5bsagreen]

What’s ’pretty easy’ is to actually understand the concept.  The calculation works against married filing jointly filers as it causes the ‘credit’ to phase out at twice the rate.  To be fair, the 6% should be applied to the combined income exceeding the threshold.  Applying it twice in essence reduces it by 12%.  So a couple at the threshold will get the full credit and a couple over the threshold, but not exceeding the phaseout total lose the credit at twice the rate of an individual.  6% to in either case makes it equitable.  Applying twice to couples is unfair.  The misunderstanding is actually how it is applied to married filing jointly and I sincerely hope someone realizes the inequity and fixes it.  

[5bsagreen]

Perhaps following the IRS interpretation, but they need to revisit the intent and realize the inequity against married filing jointly filers needs corrected.  Combines the income and then duplicates the calculated reduction.  The 6% should be applied to married filing jointly just as it is to individuals.  As is, it penalized couples to lose the ‘bonus’ deduction at twice the rate.  Not fair nor logical.