In 2024, during his presidential campaign, the now-President Donald Trump repeatedly made a promise to eliminate taxes on Social Security benefits. Following this, Donald Trump was elected as President of the United States in January and has since been working towards having his mega bill — known as the “One, Big, Beautiful Bill” — signed into law.
The One, Big, Beautiful Bill Act narrowly passed in the Senate recently, however, the proposed legislation did not contain any mention of the elimination of taxes on Social Security benefits. This, however, does not mean that President Trump is not holding true to his word. A recent analysis from the Council of Economic Advisers has revealed that a significant fraction of senior citizens who are recipients of Social Security benefits will not be required to pay tax on their Social Security benefits under the new Big, Beautiful Bill Act.
Here is what you need to know.
What is the One, Big, Beautiful Bill Act?
The One, Big, Beautiful Bill Act is a proposed budget reconciliation bill. Amongst other things, the proposed legislation aims to make permanent the Tax Cuts and Jobs Act of 2017 that had been implemented by President Donald Trump during his first term in office. In the Senate’s proposed version of the bill which narrowly passed recently, an additional tax deduction of $6,000 for seniors above the age of 65 was put forward.
This additional bump to the tax deduction for seniors is meant to be a temporary reprieve and would only be applicable for a period starting in 2025 and ending in 2029. Prior to reaching the Senate, the House version of the bill proposed an additional tax deduction of only $4,000. Regarding the House proposal, House Ways and Means Committee Chairman Jason Smith (R-Mo.) said in a statement, “Republicans are keeping President Trump’s promise to help seniors afford the cost of living through an expanded senior deduction.”
As such, taxes on Social Security have not been eliminated in a clear-cut manner, however, due to the changes proposed in the Big, Beautiful Bill Act, a new analysis from the Council of Economic Advisers has determined that a huge chunk of seniors will no longer be required to pay taxes on their Social Security benefits.
Taxes on Social Security benefits — eliminated or not?
According to the White House, “88% of seniors receiving Social Security benefits will pay no tax on their benefits under the OBBB as a result of their total deductions exceeding their taxable Social Security benefits.” This, however, does not necessarily mean that taxes on Social Security have been eliminated entirely. Instead, it deals more with the threshold of taxable income.
As such, regarding the Senate’s proposed $6,000 tax deduction, the Council of Economic Advisers’ analysis notes that the deduction “is estimated to benefit 33.9 million seniors, including seniors not claiming Social Security. The deduction yields an average increase in after-tax income of $670 per senior who benefits from it.”
Subsequently, under the OBBB, “a senior who files as a single taxpayer and receives the current average retirement benefit (approx. $24,000) will see deductions that exceed their taxable Social Security income. Married seniors who both receive the average $24,000 Social Security income — a total of $48,000 in annual income — will also see deductions that exceed their taxable Social Security income,” as per the White House.
Garrett Watson, director of policy analysis at the Tax Foundation, said that, “conflating the tax deduction with a claim that there will be no tax on Social Security could end up confusing and angering a lot of seniors who will expect to not pay taxes on their Social Security benefits.”
“While the deduction does provide some relief for seniors, it’s far from completely repealing the tax on their benefits,” Watson added.