The New Senior Tax Deduction: A Hidden Opportunity for Smart Roth Conversions

Most people don’t get excited about tax deductions, but if you’re 65 or older, you should. There’s a new senior tax deduction that could save you thousands of dollars and more importantly, open up an opportunity to convert more money to your Roth IRA at a lower tax cost. It’s a subtle change, but one that could have a big long-term payoff if you plan it right.

Here’s what’s happening. In 2025, seniors will get a higher standard deduction than everyone else about $16,550 for single filers and $32,300 for married couples filing jointly. That’s roughly $3,000 more than the regular standard deduction, which means more of your income is shielded from taxes. For retirees living on a mix of Social Security, pensions, and withdrawals from IRAs or 401(k)s, that extra deduction can make a real difference.

But the real opportunity here isn’t just about paying less tax today. It’s about using the extra deduction room strategically for Roth conversions. Let’s say you’re in a relatively low-income year maybe you’re recently retired but haven’t started Social Security yet. You can intentionally convert a portion of your traditional IRA into a Roth IRA, staying within your current tax bracket, and that larger senior deduction can help absorb some of the tax hit.

For example, if you’re married and your total income is $100,000, your taxable income after the senior deduction could drop to around $68,000. That means you can convert an additional $10,000–$20,000 to your Roth and still stay in a lower bracket than before. Over time, those strategic conversions can drastically reduce future Required Minimum Distributions (RMDs) and keep your taxable income lower later in retirement which also helps limit how much of your Social Security is taxed.

Another overlooked benefit is how this deduction interacts with healthcare costs. Medical expenses that exceed 7.5% of your adjusted gross income (AGI) can be deducted. If you combine that with the larger standard deduction, it can significantly reduce taxable income in years when healthcare costs spike freeing up more room for conversions or other taxable events without pushing you into a higher bracket.

Of course, this strategy isn’t one-size-fits-all. If you’re already taking RMDs, the senior deduction might simply offset the taxes from your distributions. But if you’re in that window between retirement and RMD age generally your late 60s or early 70s this is the sweet spot to get proactive. Every dollar you move into a Roth now is a dollar that won’t be taxed later, and that can also protect your heirs from inheriting a large tax burden under the 10-year rule for inherited IRAs.

The bottom line: Don’t ignore the new senior deduction. It’s not just a small perk it’s an opportunity to optimize your entire retirement tax strategy. By pairing it with thoughtful Roth conversions, you can turn a minor tax break into a major long-term advantage. And that’s what smart financial planning is all about using small details to make a big difference over time.

Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.