Starting in 2026, many Colorado retirees will see significant federal tax relief thanks to the One Big, Beautiful Bill, recently passed under the Trump administration.
A key provision—dubbed the senior deduction—will eliminate federal income tax on most Social Security benefits. For roughly 1 million retirees statewide, this could provide meaningful savings, especially as housing costs continue to climb and many seniors aim to remain in their homes.
National tax shift for retirees
According to the White House, the bill will increase the share of seniors who owe no federal income tax on Social Security from 64% to 88%—impacting 51.4 million out of 58.5 million retirees nationwide.
The change comes via a $6,000 deduction for individuals and $12,000 for couples. Combined with the standard deduction, it will allow most retirees to exclude their Social Security income from federal taxation. Officials have called it “the largest tax break in history for America’s seniors.”
Impact on Colorado’s aging population
Colorado, with a population of about 5.8 million, has 15.5% aged 65 and older—just over 1.5% of the national senior population.
The White House estimates 1 million Colorado seniors will benefit from the tax exemption. In addition, working seniors in the state could see:
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Real-wage increases between $4,500 and $8,100
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Take-home pay boosts between $8,100 and $11,900
The bill also funds 4,000 new Opportunity Zone housing units to expand housing options for older residents.
Who gains—and who doesn’t
The deduction phases out for incomes above $75,000 (individuals) and $150,000 (married couples), disappearing entirely at $175,000 and $250,000.
Because it’s not refundable, low-income seniors who already owe no federal tax won’t see a direct benefit. Middle-income retired homeowners are expected to gain the most, especially in high-cost markets like Denver and Boulder, where rising property taxes and housing expenses are major concerns.
An increase to the **SALT deduction cap—from $10,000 to $40,000—**will add further relief for homeowners in high-tax areas.
Looking ahead
The senior deduction is set to expire after the 2028 tax year unless Congress votes to extend it. For now, the combined benefits of larger deductions and higher SALT limits are expected to give targeted, temporary relief to Colorado’s middle-income retirees—potentially helping many stay in their homes longer despite cost-of-living pressures.
This article has been carefully fact-checked by our editorial team to ensure accuracy and eliminate any misleading information. We are committed to maintaining the highest standards of integrity in our content.
Katie is a senior who has been on staff for three years. Her favorite type of stories to write is reviews and features. Katie’s favorite ice cream flavor is strawberry.
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