A new senior tax deduction proposed under Trump's tax plan contains a quiet phase-out that could catch retirees off guard. Singles earning below $75,000 per year qualify for the full $6,000 deduction. However, for every $1,000 earned above $75,000, the deduction shrinks by $60. By the time income reaches $175,000, the deduction completely disappears.
This means that actions like a Roth conversion or a large IRA withdrawal could inadvertently push a retiree's income over the threshold, causing them to lose thousands of dollars in tax benefits. Retirees in the $75,000 to $175,000 income range need to plan carefully to avoid this hidden trap.