Key Points
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President Trump’s bill won’t eliminate federal taxes on Social Security benefits.
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However, a new deduction for seniors should reduce the federal taxes on benefits for many Americans.
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This deduction will be only temporary, though, and could cause Social Security to run out of money sooner.
The “One, Big, Beautiful Bill” that includes much of President Donald Trump’s domestic agenda is now the law of the land. The Social Security Administration (SSA) began celebrating even before the president signed the bill.
On July 3, 2025, SSA posted to its website that the legislation “ensures that nearly 90% of Social Security beneficiaries will no longer pay federal income taxes on their benefits.” However, reality isn’t quite that simple.
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A new deduction for seniors
During his campaign for a second term as president, Trump promised to eliminate federal income taxes on Social Security benefits. His “One, Big, Beautiful Bill” doesn’t accomplish that goal.
Instead, the bill features a new $6,000 deduction for Americans ages 65 and older. Some proponents of the legislation have referred to this deduction as a “senior bonus.”
Before the “One, Big, Beautiful Bill” went into effect, around 64% of seniors ages 65 and older had exemptions and deductions that exceeded their taxable Social Security income. They therefore didn’t pay any federal taxes on their Social Security benefits. The White House’s Council of Economic Advisors estimates that this percentage will increase to 88% with the additional $6,000 deduction.
Not everyone will qualify for this new deduction. The full deduction will be available only to taxpayers ages 65 and older who have a modified adjusted gross income (MAGI) of up to $75,000 for individual filers and up to $150,000 for couples filing jointly. Each spouse who is at least 65 years old can take the deduction. A reduced deduction is available for higher earners with a MAGI of up to $175,000 for single filers and up to $250,000 for couples filing jointly.
One big, not-so-beautiful catch
SSA’s celebration of the passage of President Trump’s “One, Big, Beautiful Bill” was arguably overdone. Why? There’s one big, not-so-beautiful catch with the new $6,000 deduction included in the legislation: Seniors will exchange short-term gain for long-term pain.
The benefits of the additional deduction for individuals ages 65 and older are indeed only short-term. The $6,000 “senior bonus” will be available only through 2028. While SSA’s online post stated that many Americans will “no longer pay federal income taxes on their benefits,” the truth is that the reprieve will be relatively short-lived.
The Social Security Commissioner said that the legislation “reaffirms President Trump’s promise to protect Social Security and helps ensure that seniors can better enjoy the retirement they’ve earned.” However, his statement ignores the assessment by the nonpartisan Committee for a Responsible Federal Budget (CRFB).
The CRFB estimated that the president’s “One, Big, Beautiful Bill” will reduce Social Security’s revenue by around $30 billion per year. It projects that the insolvency date for the Social Security trust fund will now be 2032 instead of 2033.
If nothing is done to bolster Social Security before the trust fund runs out of money, benefits will be slashed by around 24%, according to CRFB’s analysis. This is the long-term pain seniors will exchange for the short-term gain of not paying federal taxes on Social Security benefits for a few years.
Multiple big, ugly changes to Social Security are probably needed
What will it take to put Social Security on a firm footing so that benefit cuts won’t be necessary? The solutions to the serious problem facing Social Security will involve slowing cost growth, increasing revenue, or both.
Slowing cost growth is a nice way of saying that benefits will need to be lower for some. One idea is to gradually increase the full retirement age in the future, a move that has been made in the past. This would reduce the lifetime benefits for younger Americans impacted by the change.
Increasing revenue means tax hikes. Some advocate for raising or eliminating the maximum taxable earnings that are subject to FICA taxes used to fund Social Security.
Reducing the federal taxes seniors pay on their Social Security benefits, even if for only a few years, may be popular. However, what Social Security beneficiaries probably need the most are multiple big, ugly changes that address the program’s significant underlying problems instead of making them worse.
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