Key Points
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The One Big, Beautiful Bill (OBBB) added a new $6,000 senior tax deduction.
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This will help many — but not all — seniors on Social Security save money on taxes.
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It’s a far cry from the savings that would come from actually ending Social Security benefit taxes.
“Promises made, promises kept.” That’s how a recent White House article celebrated the One Big, Beautiful Bill’s (OBBB) new senior tax deduction, set to take effect for the 2025 tax year. The Trump administration has claimed that, as a result of this change, 88% of seniors on Social Security won’t owe any taxes on their Social Security benefits — a follow-through on one of President Donald Trump’s biggest campaign promises.
It certainly sounds compelling, but as someone who’s been writing about Social Security for years, it only took me one look at the data to realize that the OBBB change was far from an end to benefit taxes. The new deduction will help many seniors to a degree, but you need to understand what it is — and isn’t — to know what kind of a difference it will make for you.
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How the OBBB senior tax deduction works
The OBBB added a new $6,000 tax deduction for seniors 65 and older ($12,000 for married couples). This is on top of the standard deduction for their filing status, which the law also increased from $15,000 to $15,750 for single adults and from $30,000 to $31,500 for married couples, and the existing senior tax deduction ($2,000 for an individual or $1,600 per qualifying individual for a married couple).
Tax deductions reduce the portion of your income you have to pay taxes on. For example, if you earned $50,000 this year and qualified for $15,000 in tax deductions, you’d only owe taxes on the remaining $35,000. So the OBBB change is definitely useful. It means you’ll owe taxes on less money than you did before.
That said, not everyone will be able to take advantage of this new deduction. Single adults with incomes over $75,000 and married couples with incomes over $150,000 will see their deduction decrease by $60 for every $1,000 by which their income exceeds these thresholds. Single adults with incomes greater than $175,000 and married couples with incomes exceeding $250,000 won’t be able to claim the new deduction at all.
So far, we can already see two key differences between the OBBB senior deduction and Trump’s promise to end benefit taxes. Seniors under 65 receive no benefit from the OBBB deduction, even if they’re on Social Security, and high earners who would have benefited from ending benefit taxes will experience no gains from this new change. But there’s another big distinction to be made between Trump’s promise and what he delivered.
The tax savings fall far short of what Trump promised
The OBBB senior tax deduction will give the average senior about $670 more in after-tax income, according to a Council for Economic Advisors report. But that’s a far cry from the gains that would come from ending the benefit taxes that are still on the books, even after the OBBB’s passing.
Let’s look at the example of a single 65-year-old who takes $50,000 from a 401(k) in 2025 and has annual Social Security benefits of $24,000. The government decides what percentage of your Social Security benefits to tax by looking at your provisional income — your adjusted gross income (AGI), plus any nontaxable interest from municipal bonds, and half your annual Social Security benefit. In this case, that’s $62,000.
Then, it compares this amount to the following chart.
|
Marital Status |
0% of Benefits Taxable If Provisional Income Is Below: |
Up to 50% of Benefits Taxable If Provisional Income Is Between: |
Up to 85% of Benefits Taxable If Provisional Income Exceeds: |
|---|---|---|---|
|
Single |
$25,000 |
$25,000 and $34,000 |
$34,000 |
|
Married |
$32,000 |
$32,000 and $44,000 |
$44,000 |
Data source: Social Security Administration.
Under Social Security benefit tax rules, 85% of their benefits would be taxable and get added to their AGI, bringing it to $70,400. So what does this mean for their taxes?
The following table outlines this person’s tax bill under pre-OBBB law, with the new OBBB standard and senior deductions in place, and in a scenario where the OBBB hadn’t passed and benefit taxes were eliminated instead.
|
Pre-OBBB Law |
With OBBB Senior Deduction |
If Benefit Taxes Were Eliminated |
|
|---|---|---|---|
|
401(k) Withdrawals |
$50,000 |
$50,000 |
$50,000 |
|
Social Security Benefits |
$24,000 |
$24,000 |
$24,000 |
|
Adjusted Gross Income (AGI) |
$70,400 ($50,000 from 401(k) + $20,400 of SS benefits) |
$70,400 ($50,000 from 401(k) + $20,400 of SS benefits) |
$50,000 from 401(k) |
|
Standard Deduction for Single Filers |
$15,000 |
$15,750 |
$15,000 |
|
Senior Deduction |
$2,000 |
$8,000 |
$2,000 |
|
Taxable Income |
$53,400 |
$46,650 |
$33,000 |
|
Taxes Owed |
$6,662.00 |
$5,359.50 |
$3,721.50 |
Source: Author’s calculations.
In this example, the OBBB senior deduction and the increase to the standard deduction for all single filers would result in $1,302.50 in tax savings. However, eliminating Social Security benefit taxes would’ve saved $2,940.50 in taxes, even without the new deductions in place.
So the Council of Economic Advisors’ claim that 88% of seniors on Social Security won’t pay any benefit taxes isn’t accurate. The report says this is a result of “their total deductions exceeding their taxable Social Security benefits.” But if we follow this logic, we could say that single filers who had $16,550 or less in taxable Social Security benefits in 2024 (equal to the $14,600 standard deduction for single filers plus the $1,950 senior deduction that year) didn’t pay taxes on their Social Security benefits, when we know that’s not true. If you have taxable Social Security benefits, you are paying taxes on them.
The OBBB didn’t do anything to change how benefit taxation works. An increasing number of seniors will encounter this tax as average benefits and living costs continue to rise. The OBBB’s new senior deduction may provide a bit of relief, but it’s a small gain compared to Trump’s initial promise.
It’s also, for the moment, a limited-time offer. The law says it only applies until the 2028 tax year. Congress will have to decide whether to extend it for future years.
Whether the government will actually end benefit taxes remains an open question. Many seniors want it to do so, but with Social Security facing insolvency, the program could really use the benefit tax revenue right now. However, if Congress makes broader changes to the program in the next few years to keep it sustainable for future generations, talk of ending benefit taxes may resurface.
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