Key Points
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The new law adds a tax deduction for low- and middle-income seniors 65 and older.
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This could result in significant savings in the coming years.
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It also means less tax revenue will be available for programs like Social Security.
Taxes are never much fun, but they could be a little less painful for you this year if you qualify for some of the new tax breaks in President Donald Trump’s “big, beautiful bill,” like no taxes on overtime or tips. There’s also a new senior deduction that could significantly reduce your taxable income if you’re 65 or older and meet the income requirements.
These changes have already received a lot of media attention, and rightly so. But you may not be as familiar with their potential drawbacks, especially for seniors who depend on their Social Security checks to make ends meet.
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Short-term savings are on the way for many seniors
The bill added a new senior tax deduction on top of the existing $2,000 senior deduction ($1,600 each for married couples). Single adults who qualify for this new deduction will see their taxable income reduced by up to $6,000 this year, and married couples could see it reduced on up to $12,000 of income. This is in addition to the standard deduction you qualify for based on your filing status.
To qualify for the new senior deduction, you must be 65 or older by the end of the year. Younger adults won’t qualify for the tax break even if they’re already claiming Social Security.
Also, your income must be at or below $75,000 for a single individual or $150,000 for a married couple to claim the full deduction. If you earn more than this, you may qualify for a partial deduction. This phases out at $150,000 for single adults and $250,000 for married couples.
You can claim this deduction in every year you’re eligible for it from now through 2028. The bill’s new senior deduction expires at the end of that year, but there’s a chance Congress could extend it.
The “big, beautiful bill” may further strain Social Security
Lower taxes, especially for cash-strapped seniors, probably seems like great news, but it’s actually a mixed bag. The tax savings will be an immediate help, but less taxable income also means Social Security won’t have as much in payroll taxes coming in over the next few years. This is the program’s main funding source.
Social Security benefit taxes and income from the program’s trust funds supplement this. But the trust funds are expected to be depleted by 2034, according to the latest Social Security Trustees Report, released in June. After this happens, it would only be able to pay about 81% of scheduled benefits.
A more recent report, published after the bill’s passage, shows that it will result in a net increase in program costs that will likely accelerate the trust funds’ depletion from the third quarter of 2034 to the first quarter of 2034. Basically, it means the government will now have even less time to come up with a plan to avoid significant benefit cuts that could be disastrous to seniors.
It’s a problem many in government aren’t keen on tackling at the moment because the only way to resolve the issue, apart from cutting benefits, is to increase taxes. Yet the longer Washington waits to address the situation, the fewer options it has.
We can’t know what the government will do about Social Security’s future, but we do know that the more savings you have, the better prepared you’ll be to navigate whatever comes next.
If the new tax deduction results in an above-average refund for you, consider investing some of that money. It could give you a little more to fall back on if Social Security doesn’t go as far in a decade as it does today.
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