Key Points
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President Trump promised to end taxes on Social Security and the White House says the One, Big, Beautiful Bill makes good on that promise.
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The legislation does not actually end taxes on Social Security, but rather adds new senior deductions that eliminate those taxes for certain individuals.
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Single seniors (aged 65 and older) with up to $75,000 in income can now deduct $23,750, and married seniors with up to $150,000 in income can deduct $46,700.
President Trump vowed to end taxation of Social Security benefits during his campaign last year. The White House says he delivered on that promise with the One, Big, Beautiful Bill, which narrowly won approval in both chambers of Congress in recent weeks and was signed into law on July 4. But that is not exactly true.
The bill used a legislative process known as budget reconciliation. The 1974 Budget Act explicitly prohibits reconciliation bills from including provisions that would change Social Security benefits or funding. Taxes collected on Social Security are a funding source for the retirement program, so the legislation could not eliminate that revenue.
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Nevertheless, the One, Big, Beautiful Bill does include provisions that will help millions of seniors. Here are the important details.
Image source: Official White House Photo by Shealah Craighead.
Who pays taxes on Social Security and how the taxable amount is calculated
Social Security benefits are subject to federal income tax when combined income exceeds certain thresholds. Combined income is defined as the sum of adjusted gross income plus nontaxable interest plus one-half of Social Security benefits.
The following chart shows the taxable portion of Social Security at different combined income thresholds.
|
Taxable Portion of Benefits |
Single Filers |
Joint Filers |
|---|---|---|
|
0% |
Under $25,000 |
Under $32,000 |
|
50% |
$25,000 to $34,000 |
$32,000 to $44,000 |
|
85% |
Above $34,000 |
Above $44,000 |
Data source: The Social Security Administration.
Importantly, the federal government first taxed Social Security benefits in 1984. Initially, less than 10% of recipients actually paid taxes on benefits, but the percentage has risen greatly over the years because Congress has never adjusted the combined income thresholds for inflation.
To elaborate, Social Security benefits generally increase each year because recipients get cost-of-living adjustments to ensure payments keep pace with inflation. Yet the taxation thresholds have not changed in four decades, so the portion of beneficiaries that now meet the criteria for taxation is much higher. More than half of beneficiary families now pay taxes on benefits, according to the Social Security Administration.
The One, Big, Beautiful Bill does not eliminate Social Security taxes, but it comes close
As mentioned, budget reconciliation bills cannot include provisions that would alter Social Security benefits or the program’s funding. However, the Trump administration sidestepped that problem by increasing the standard deduction and adding a new senior deduction, as follows:
- The standard deduction increased to $15,750 (up from $15,000) for single filers and $31,500 (up from $30,000) for married couples.
- The new senior deduction applies to persons aged 65 and older. Single filers can deduct $6,000 and married couples filing jointly can deduct $12,000.
Importantly, the new senior deductions are additive with the senior deductions that existed before the One, Big, Beautiful Bill. But they are phased out for single filers with income above $75,000 and married couples with income above $150,000.
The following table shows all tax deductions available to eligible seniors.
|
Deductions |
Single Seniors |
Married Seniors Filing Jointly |
|---|---|---|
|
New senior deduction |
$6,000 |
$12,000 |
|
Standard deduction |
$15,750 |
$31,500 |
|
Existing senior deduction |
$2,000 |
$3,200 |
|
Total |
$23,750 |
$46,700 |
Data source: The White House. The new senior deduction is phased out for single filers with income above $75,000 and married filers with income above $150,000.
Approximately 46% of seniors (aged 65 and older) on Social Security owed taxes on benefits before the One Big Beautiful Bill became law, but the legislation brings that figure down to 12%, according to the White House. In other words, 88% of seniors on Social Security will not owe taxes on benefits, at least temporarily. The new senior deductions are set to expire after 2028.
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