President Donald Trump’s mega bill titled the One, Big, Beautiful Bill Act recently passed the Senate on a narrow margin and under the proposed legislation, Social Security recipients may no longer be required to pay taxes on their monthly benefits. During his presidential campaign in 2024, President Trump made repeated promises to eliminate taxes on Social Security benefits. However, in the proposed legislation that President Trump has referred to as “the most beautiful piece of policy ever written,” no mention of eliminating tax on Social Security benefits was made.
Retirees on Social Security will still stand to benefit from the legislation, however. Instead of eliminated Social Security taxes, the bill proposed an additional tax deduction for individuals aged above 65. Here is what you need to know.
What is the One, Big, Beautiful Bill Act?
In the previous version of the bill that passed the House, an additional tax deduction of $4,000 was proposed for senior citizens for the temporary period starting in 2025, all the way through to 2028. In the Senate’s version that recently passed in a 51-50 ratio, the tax deduction for seniors was proposed at $6,000 for same temporary period.
In a post on Monday on social media platform X, the White House wrote that, “under the bill, 51.4 million seniors—88 percent of all seniors receiving Social Security income—will not pay any tax on their benefits income as a result of the change,” and a brand new analysis from the Council of Economic Advisers has affirmed this.
This statement could be perceived as a bit misleading, however, because taxes on Social Security have not been eliminated as such. Rather, it is the threshold of taxable income that has been impacted and as a result, a larger cohort of beneficiaries will now be shielded from being required to pay taxes on their benefits due to the changes under the One, Big, Beautiful Bill Act.
According to what the White House wrote in another post on social media platform X, “The One Big Beautiful Bill delivers the largest tax cut in history for middle- and working-class Americans.”
Under the terms of the new mega bill, “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.
Taxes on Social Security benefits
Whilst eliminating taxes on Social Security benefits would be welcomed wholeheartedly by beneficiaries, it is a short-term fix at best and will likely cause turmoil to the Social Security program in the long-run since benefit taxes are a source of income for the program.
In a statement to Newsweek, Karla Dennis, tax adviser and CEO of tax strategy firm KDA Inc., said that “while the plan sounds nice it is a short-term fix that doesn’t solve the bigger problem.”
“Getting rid of taxes on Social Security would make things a lot easier for retirees. Many seniors don’t expect to owe taxes in retirement, and this would help prevent surprise bills. In the end, we need real change that lasts, not just one-time payouts. Seniors deserve long-term relief they can count on,” Dennis added.
In addition to supporting the Social Security program, the revenue from benefit taxes also supports Medicare. According to the Peter G. Peterson Institute, “without that source of revenue, the trust fund for Social Security would be depleted in 2032, one year earlier than currently projected, while Medicare’s trust fund would be depleted in 2030, six years earlier than forecast now.”