By Edward Cates. Chairman, TSCL
In recent months, few pieces of legislation have generated as much attention—or as much controversy—as the “One Big Beautiful Bill Act,” or OBBB for short, which President Trump signed into law on July 4th. Many seniors are wondering what this massive, almost 1,000-page package could mean for them. While it encompasses a wide range of proposals covering everything from taxes and energy to immigration and defense, seniors should be attentive to its specific impact on Medicare, taxes, and healthcare savings.
Some provisions offer financial relief, like expanded tax deductions and increased flexibility for Health Savings Accounts. Others, however, raise serious concerns about the long-term stability of Medicare and access to services.
In this article, we’ll break down the most important ways the OBBB affects older Americans.
Extend the 2017 Tax Cuts
One of the most important provisions of the OBBB is that it would extend most of the tax cuts passed in 2017, during President Trump’s first term. This will preserve the current tax federal tax brackets, which the previous bill lowered, and standard deductions, which the previous bill raised.
This obviously has large implications for seniors. Although many seniors, especially those who rely mostly or entirely on Social Security, pay little to no federal taxes, those who do would pay more if their tax brackets and standard deductions returned to pre-2017 levels because the bill did not pass. That would have meant less income in seniors’ wallets every month.
The OBBB will even expand the 2017 tax cuts in some areas. For example, take the State and Local Tax (SALT) exemption. The bill would increase the amount of state and local taxes Americans can claim on their itemized deductions from $10,000 to $40,000, providing relief for seniors in high-tax states. The new threshold will take effect in 2025, increase by 1 percent per year, and revert to the current $10,000 in 2030.
Provide Seniors With Tax Relief
On the campaign trail, President Trump proposed eliminating the taxes seniors pay on their Social Security benefits. While the OBBB doesn’t accomplish that completely due to rules surrounding the reconciliation process, it does provide tax relief specifically for seniors and comes close to doing so.
The bill has a $6,000 tax deduction for taxpayers aged 65 and older that they can take on top of the standard deduction, which is $15,000 for single filers in 2025. For married couples filing jointly, both spouses can take the senior deduction. The deduction starts to phase out when a person’s adjusted gross income is $75,000 or higher for single tax filers, or $150,000 for couples who file their taxes jointly. It will expire at the end of 2028.
According to a press release from the Social Security Administration, the new senior deduction will ensure that nearly 90 percent of seniors no longer pay federal income taxes on their Social Security benefits. For many seniors, especially those who earn enough to pay taxes on their benefits (until now, at least) but still struggle to get by, the provision will provide relief as soon as the next tax season.
Expand Access to Health Savings Accounts
Health Savings Accounts (HSAs) are a tax-advantaged savings account for qualified medical expenses, designed for people with only high-deductible health plans (HDHPs). And under current policy, it’s virtually impossible for seniors to contribute to them because Americans are automatically enrolled in Medicare Part A when they reach age 65, which removes their eligibility.
The OBBB will address this issue by allowing seniors who are enrolled in an HDHP and Medicare Part A to contribute to HSA plans. Other restrictions around contributing to HSAs and using the funds they hold still apply, but the law’s HSA expansion will provide additional resources for seniors who continue working after becoming eligible for Medicare.
Further Restrict Medicare and Medicaid Eligibility for Noncitizens
U.S. law currently does not allow for anyone living in the country illegally to receive Medicare benefits. To be eligible for Medicare, you must:
- be at least 65 years old, have a disability, or suffer from a specified medical condition
- be a U.S. citizen or lawful permanent resident for at least 5 consecutive years
- have at least 10 years of work history.
However, some states use their own money to help undocumented immigrants get health coverage. Under the OBBB, states that continue to cover undocumented immigrants will face penalties to their Medicaid funding, with the amount determined by how much coverage the state provides. The OBBB also mandates additional oversight of states by the Centers for Medicare & Medicaid Services (CMS).
Potentially Cause Future Reductions to Medicare
The nonprofit Congressional Budget Office projects that the OBBB will raise the U.S. national debt by approximately $3.4 trillion over 10 years. That’s a lot of debt, and when the bill comes due, it could have a big effect on federal benefits programs without congressional action.
Medicare’s long-term funding could potentially be at risk. According to the Congressional Budget Office, this increase to the national deficit would trigger a mechanism called sequestration, which would reduce Medicare’s funding by an estimated $490 billion between 2027 and 2034. Congress could pass further legislation to make up for the funding, but of course, that runs the risk of leaving seniors’ healthcare on the hook while Congress gets the job done.
