Make Permanent the Enhanced Senior Deduction

The One Big Beautiful Bill Act of 2025 provided a new deduction of $6,000 for individuals 65 or older available for tax years 2025 through 2028. The deduction is available to itemizers and non-itemizers, but it begins to phase out when modified adjusted gross income exceeds $75,000 for single taxpayers or $150,000 for joint filers.

This option makes the new $6,000 senior deduction permanent. For some taxpayers, the senior deduction lowers marginal tax rates, but for others who are subject to the phaseout, it creates higher marginal tax rates on income. These two effects largely cancel, resulting in little overall impact on marginal tax rates and economic output.

On a conventional basis, this option would increase the primary deficit by $137.9 billion over the budget window. Long-run GDP would rise by less than 0.05 percent, while long-run GNP would fall slightly. On a dynamic basis, the primary deficit would increase by $132.5 billion from 2027 through 2036, $5.4 billion less than the conventional estimate. Incorporating changes in interest costs, the publicly held debt-to-GDP ratio would be higher than baseline, reaching 177.0 percent by 2056.

On average, in 2036, taxpayers would see increases in their after-tax incomes of 0.1 percent. Because of the phaseout at the top and low taxable income at the bottom, the main beneficiaries of the change are the middle three quintiles. On a long-run dynamic basis, taxpayers would see a 0.1 percent increase on average.