Soon, millions of seniors may pay less on their Social Security benefits thanks to a recently signed tax law by President Trump. However, even though the change could bring meaningful savings for many retirees, it is not permanent, as some headlines suggest.
What the ‘One Big Beautiful Bill’ Means for Retirees’ Taxes
President Trump signed the “One Big Beautiful Bill” into law on July 4, 2025. This bill lowers taxable income on paper, which may enable retirees to stay below the thresholds that trigger taxation on their benefits.
According to the White House, approximately 64% of seniors currently don’t pay any taxes on their Social Security benefits. The administration claims the new law will raise that number to 88%.
However, the details tell a more nuanced story.
It’s a Deduction, Not a Full Tax Exemption
Even though some headlines say there is “no tax on Social Security, that’s not quite true. The new law doesn’t eliminate taxes on benefits; it only adds a temporary tax deduction that can reduce or even wipe out what some retirees owe in taxes, depending on their income.
“Low-income retirees are already tax-exempt. So, it is reasonable to say the policy provides relief to middle and upper-middle-class households,” said Krisstin Petersmarck, founder of New Horizon Retirement Solutions.
Here’s how the deduction works:
- If you’re 65 or older and single, you can deduct $6,000, but only if your income is under $75,000.
- Married couples, both 65 or older, can deduct $12,000 total if their combined income is under $150,000.
- The deduction starts to shrink once you go over those limits and disappears entirely at $175,000 for singles or $250,000 for couples.
According to these figures, filing jointly offers the best benefit.
How This Impacts Social Security Taxation
Under current tax rules, Social Security benefits become taxable once income surpasses certain thresholds:
- Single filers: No tax if income is below $25,000.
- Married couples: No tax if income is below $32,000.
- Up to 85% of benefits may be taxed above $34,000 (individuals) or $44,000 (couples).
Because the new senior deduction reduces total income on paper, many retirees may now fall under the taxable thresholds, effectively lowering or eliminating the tax on their benefits.
For example, a married couple over 65 with $120,000 in income could now deduct:
- $31,500 (standard deduction)
- $3,200 (age-related bonus)
- $12,000 (new senior deduction)
That’s a total deduction of $46,700—enough to reduce taxable income substantially and potentially eliminate Social Security taxation.
Who Benefits Most?
“This mostly helps retirees who were paying significant taxes on their Social Security to begin with,” said CPA Paul Miller of Miller & Company LLP. “Lower-income retirees already didn’t pay much tax on benefits, so the largest dollar benefits skew toward the middle of the income distribution.”
Estimates from the Tax Policy Center indicate that the biggest winners are seniors earning between $80,000 and $130,000. These retirees could see an average tax cut of about $1,100 annually.
High-income households earning more than $175,000 (or $250,000 for couples) are ineligible for the deduction. And because the benefit expires in 2028, there’s no guarantee it will last.
How Retirees Can Make the Most of the New Tax Break
As we wait for the change to take effect for the 2025 tax year (filed in 2026), financial experts advise you to do the following:
- Update your tax projections: See how the new deduction may affect your Social Security taxation.
- Adjust estimated payments: If you currently prepay taxes on benefits, you may be able to reduce or pause those payments.
- Work with a tax advisor: Filing status and income sources can significantly affect your outcome—get personalized advice.
- Don’t rush to claim Social Security: “When to file is a long-term decision and should not be swayed by short-term tax relief,” said Ash Ahluwalia of OneTeam Financial. “Claiming early still reduces your monthly benefit permanently.”
Conclusion
Although this new deduction won’t make Social Security benefits entirely tax-free for everyone, it will offer relief to millions, especially middle-income retirees. Seniors should take advantage of the tax break now because it is set to expire in 2028.