Key Points
-
A deduction only reduces taxable income.
-
Your situation depends on factors such as income, deductions, and filing status.
-
The senior deduction expires at the end of 2028.
-
President Donald Trump spent months on the campaign trail promising to end taxes on Social Security benefits. And, after officially signing the One Big Beautiful Bill Act (OBBBA) into law in July 2025, Trump’s White House issued a press release declaring that 88% of all seniors who receive Social Security will pay no taxes on their benefits.
As you plan for retirement — or the remainder of your retirement — it’s important to note: While the White House’s announcement is technically true for now, it doesn’t tell the whole story.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
Image source: Getty Images.
The promise vs. reality
The eye-catching part of the OBBBA is a new “senior bonus” deduction worth up to $6,000 per person or $12,000 per married couple. And naturally, many Americans aged 65 or older will benefit from deducting thousands of dollars from their taxable income.
Still, while the White House describes the deduction as “promises made, promises kept,” it isn’t a tax cut. Instead, it’s a deduction, and a temporary one.
The deduction featured in the OBBBA applies only to tax years 2025 through 2028, then disappears again. More importantly, it does not repeal the underlying IRS rules that decide how much of your Social Security benefit is taxable.
Social Security remains taxable income
The core rules regarding taxes in retirement remain unchanged, despite the OBBBA. When determining your tax burden, the IRS will look at your combined income, defined as:
- Adjusted gross income
- Plus tax-exempt interest
- Plus 50% of annual Social Security benefits
Per original rules, the taxable portion of benefits varies by filing status and income. For example:
|
Filing Status
|
Combined Income
|
Taxable Amount of Benefits
|
|
Single/head of household
|
Under $25,000
|
0%
|
| |
$25,000–$34,000
|
50%
|
| |
Over $34,000
|
85%
|
|
Married filing jointly
|
Under $32,000
|
0%
|
| |
$32,000–$44,000
|
50%
|
| |
Over $44,000
|
85%
|
|
Married filing separately
|
Living apart: Same thresholds as single
|
0–85%
|
| |
Living with a spouse any time during the year
|
Up to 85%
|
Data source: Mercer Advisors.
The deductions included in the OBBBA phase out as income rises. For example, the break begins to phase out at $75,000 modified adjusted gross income (MAGI) for singles, and at $150,000 for couples. The break disappears entirely for a single earner with a MAGI of $175,000 and a couple with a MAGI of $250,000.
Don’t count on escaping the tax man for good
Despite the fanfare, Social Security remains taxable for many recipients, and the rules that drive that tax bill have not changed. Withdrawals from 401(k)s, IRAs, interest, dividends, and other sources of income all feed into the combined income formula and may make benefits taxable.
For some retirees, “No tax on Social Security” may feel like little more than a marketing slogan for a temporary tax deduction.
The $23,760 Social Security bonus most retirees completely overlook
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income.
One easy trick could pay you as much as $23,760 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Join Stock Advisor to learn more about these strategies.
View the “Social Security secrets” »
The Motley Fool has a disclosure policy.
