9 Ways the One Big Beautiful Bill Act Impacts All Retirees

The One Big Beautiful Bill Act touches many aspects of retirement, from taxes to health care and inheritances. So, it's essential to understand how it affects your retirement plan.

Here are nine key changes that every retiree should understand and prepare for now that the bill has become law.

Retirees who are 65 and older now can claim an extra $6,000 deduction per person (or $12,000 for married couples) on their tax returns on top of the standard deduction.

This "senior bonus" can effectively erase taxes on Social Security benefits for many middle-income retirees. It's a timely boost that will help millions of retirees to get ahead financially.

For eligible couples, this could mean up to $12,000 less in taxable income each year. However, this tax break phases out at a modified adjusted gross income (MAGI) above $75,000, or $150,000 per married couple filing jointly.

In addition, the extra deduction is set to disappear after 2028.

Contrary to some headlines, Social Security benefits remain partially taxable: The new legislation simply adds an income-tax deduction as mentioned above, and is not a repeal of the taxation of Social Security benefits.

As such, retirees need to monitor all their taxable income if they want to avoid paying taxes on Social Security income. Staying aware of filing thresholds and budgeting accordingly remains essential.

The bill permanently raises the federal estate and gift tax exemption to $15 million per person, or $30 million per married couple. The change kicks in during 2026 and will be indexed for inflation going forward.

The provision secures and extends the higher exemption that the 2017 Tax Cuts and Jobs Act created. Many estates will no longer owe federal estate tax, preserving generational wealth. It gives families clarity and room for long-term planning.

The state and local tax, or "SALT," cap temporarily rises from $10,000 to $40,000 for taxpayers earning under $500,000. This will allow retirees in high-tax locales such as New York or California to deduct a large amount of these taxes from their federal income.

Higher earners will see a lower cap until it phases out at the $10,000 mark.

In 2030, the SALT cap will return to $10,000 unless further action is taken by a future Congress.

The new legislation includes cuts to Affordable Care Act (ACA) subsidies and eliminates more than $1 trillion in Medicaid funding starting in 2026. This may increase out-of-pocket medical expenses for some retirees.

That means some retirees on ACA or Medicaid could lose benefits or pay more for those benefits.

The act introduces an 80-hour-per-month work requirement and cost-sharing for many recipients of Medicaid, the joint federal and state health care program that largely serves low-income Americans.

The change mostly affects working-age adults between the ages of 19 and 64. AARP estimates that the new rule will impact 9 million Medicaid recipients.

While the House version of the legislation included a provision allowing those on Medicare to make contributions to a health savings account (HSA), the final bill did not include this perk.

People who are already on Medicare cannot contribute to an HSA account, although they can tap into an existing account to pay medical bills.

The bill scales back federal funding for the Supplemental Nutrition Assistance Program (SNAP). It also tightens eligibility and increases work requirements for some recipients.

This means that millions of low-income seniors could lose or have their benefits reduced starting in October 2027. That could translate to increased grocery bills or unmet nutritional needs.

Despite the tax overhaul, the mortgage interest deduction remains unchanged and is limited to a principal of $750,000. Any interest paid on principal above that amount does not receive a tax break.

This means seniors with large mortgages won't see extra relief.

The One Big Beautiful Bill Act offers valuable tax relief to retirees, such as a new senior deduction, a SALT increase, and boosted estate exemptions.

At the same time, it introduces new financial and health care challenges for retirees.

With benefits and drawbacks clearly in play, now is an optimal time to adjust your tax, health care, and estate strategies thoughtfully. Prepare now in order to achieve a stress-free retirement.