The Social Security Administration sent a message to 66 million Americans declaring the elimination of federal income taxes on Social Security benefits for 90% of recipients. This message claimed that the new law, “One Big, Beautiful Bill” (OBBBA) would eliminate federal income taxes on Social Security for about 90% of recipients, which could be a major win for seniors.
Despite the optimism, the statement created confusion. Although the OBBB offers new tax deductions for seniors, it does not eliminate taxes on Social Security benefits. Additionally, it doesn’t apply to all recipients. The message by the SSA is twisted into a much larger claim that makes it seem like a major win.
What the New Law Does
Instead, the law introduces a temporary tax deduction for seniors aged 65 and older. Although it can lower taxable income and reduce the portion of your Social Security that is taxable, it doesn’t eliminate taxes outright.
Starting in 2025, seniors aged 65 and older can deduct $6,000 from their taxable income, while married couples where both spouses are 65 or older can deduct $12,000. Additionally, to qualify, the individual must earn under $75,000, while joint filers must earn under $150,000. Single filers earning above $175,000 and joint filers earning $250,000 are phased out of the “tax break.”
This means that only moderate to lower–income retirees benefit from this new bill. Additionally, the law does not come close to eliminating Social Security taxes for 90% of all beneficiaries as implied in the message sent by the SSA.
Critics Call the SSA Message Misleading
The SSA’s email attracted a lot of criticism from advocacy groups, former agency officials, and lawmakers, with many saying that the message strayed into political territory. Alex Lawson, executive director of Social Security Works, termed the SSA’s message a breach of trust, while former SSA deputy commissioner Jeff Nesbit termed it unconscionable.
The formatting of the email was also unusual for official communication from the SSA, causing some people to assume that it was a scam. This was alarming, considering that the agency has regularly warned beneficiaries against fraudulent emails.
Could This Tax Change Hurt Social Security?
This tax change could have detrimental effects on the solvency of the Social Security fund, which is currently estimated to go short of funds by 2034.
Bobby Kogan warned:
“We already have a problem of not enough money going into the trust fund. This bill makes even less money go into the trust fund.”
The Penn Wharton Budget Model estimates that eliminating income taxes on Social Security could reduce federal revenue by $1.5 trillion over 10 years and raise the national debt by 7% by 2054.
Conclusion
The One Big Beautiful Bill brings a tax break to many seniors, but it doesn’t eliminate taxes on Social Security benefits. Despite campaign promises, this law doesn’t come close to delivering a full repeal of taxes on Social Security benefits. The law offers a temporary, income-based deduction that only benefits older Americans aged 65 and above. Therefore, millions are still left paying taxes on their benefits.