Dubbed by President Donald Trump as “the most beautiful piece of policy ever written,” the One Big Beautiful Bill Act was recently passed by the House of Representatives in May. Social Security taxes were not proposed for elimination, however, seniors could have a big, bonus tax break in the pipeline if the Senate’s version of the bill passes.
As the Senate puts together its version of the bill, there are certain requirements that must be met in order for reconciliation to occur. “This would allow it to bypass the filibuster and pass with a simple majority vote,” as per a report from the Journal of Accountancy.
How will Social Security beneficiaries be impacted by the One Big Beautiful Bill Act?
In House proposal, an additional $4,000 tax break for seniors was proposed. The Senate version, however, proposes a bonus tax break of $6,000 for seniors. Both tax deduction proposals were stated to be a temporary reprieve amidst rising costs of living and would only run through the years 2025 till 2028.
According to Ted Sarenski, a tax expert, “whether the additional senior deduction is $4,000 or $6,000, for joint filers with both spouses over 65, this would result in a standard deduction of $38,000 or $42,000 – amounts that exceed what the majority of seniors who currently itemize could reach, especially with the state and local tax (SALT) deduction capped at $10,000.”
However, Sarenski further warns that “the bigger issue: come 2028 when this bonus is set to disappear, there will be tremendous squawking about a $8,000 or $12,000 drop in the standard deduction like we see now with proposed Medicaid cutbacks today which are merely trying to put Medicaid back where it was before COVID.”
It should be noted that only individual seniors earning an income of $75,000 and couples earning an income of $150,000 will be eligible to qualify for the proposed bonus tax deduction.
In a statement regarding the House’s proposed $4,000 tax deduction, House Ways and Means Committee Chairman Jason Smith (R-Mo.) claimed, “Republicans are keeping President Trump’s promise to help seniors afford the cost of living through an expanded senior deduction.”
SALT cap — increase or no increase?
In the House’s bill, raising the deduction cap for state and local taxes (SALT) to $30,000 was proposed. The current law has the SALT deduction capped at $10,000, however, a manger’s amendment to the House’s proposed $30,000 cap, increased the cap to $40,000 per household. In the case of married couples filing separately, the cap would be $20,000.
The Senate’s version, on the other hand, proposes that the SALT cap remains at $10,000 and that the limit should be made permanent, and provisions to curb any workarounds for the $10,000 cap were also mentioned. Senate Republicans are positioning the $10,000 cap as starting point for negotiations, with the hope of the final figure landing somewhere between the Senate and the House’s proposals.
Rep. Mike Lawler (R-N.Y.), member of the House SALT caucus, asserted that the Senate’s $10,000 cap was “DEAD ON ARRIVAL” and that “$40,000 is the deal – I will not accept a penny less.”
Regarding the SALT proposal, Sarenski also noted that it would be “a concern for residents of high tax states like California, New York, Connecticut, etc.”
Sarenksi further added that there is a possibility is does not pass the House and that “there will be a compromise somewhere in the middle of those two figures.”
Tax professional George Papadopoulos states, “I have been around for a while and long enough to not really get into pending legislation matters. I know in general what is on the table and stay away from guessing what will actually be signed into law. When we actually have a law then it is time to get into analyzing it.”
“Whoever said negotiating tax legislation is like making sausage was right,” Papadopoulos added.