Since the Social Security amendments of 1983, a portion of benefit income became subject to taxation if the recipient’s total income exceeded a certain threshold. This tax revenue is then put back into the program’s trust funds so as to generate more revenue, thereby allowing for the program to have a greater longevity.
Jumping forward to 2024, the now elected president Donald Trump made repeated promises on the campaign trail to eliminate taxes on Social Security benefits if elected to office. Subsequently, the president spent the first six months of his second term in office working towards having his mega bill and reconciliation package, the One Big Beautiful Bill Act, signed into law.
With regards to taxes, seniors, and Social Security, the new legislation did not include the elimination of taxes on benefits. It does, however, provide seniors aged 65 and older with an additional tax deduction of $6,000 for a temporary period. As a result of this additional tax break, a higher number of seniors will be exempt from paying taxes on their benefits. Here is what you need to know.
Senior tax deduction under new legislation
On July 4th, president Donald Trump officially signed the One Big Beautiful Bill Act into law which included an additional tax break for seniors. Following this, many official channels, including the White House, began touting the bill as the elimination of taxes on Social Security benefits for most despite this not necessarily being the case.
In actuality, due to the additional tax deduction, a higher number of seniors will now be exempt from paying taxes on their benefits as the tax break changes the taxable income threshold. The tax deduction will be in effect for a temporary period beginning in 2025 and ending in 2028, unless Congress decides to extend it. In order to qualify for the tax relief, the senior filer must have turned or will be turning 65 years of age before the end of the tax year.
The tax relief under the new legislation is a $6,000 tax break for single filers, or a $12,000 tax break for joint filers. Additionally, if the senior filer is married, they will have to file their taxes jointly to qualify for the tax relief, meaning that married couples who opt to file their taxes separately will not be considered for the tax relief.
Furthermore, the modified adjusted gross income, or MAGI of the single filer cannot exceed $75,000, whilst the MAGI of a couple jointly filing cannot exceed $150,000 for the full tax relief to be applied. The filer must also provide their Social Security number on their tax return. Assuming a senior single filer fulfills all of these requirement, they could likely be looking at a total tax deduction of $23,000 (Standard deduction: $15,000 + Enhanced standard deduction for seniors: $2,000 + New senior deduction: $6,000 = $23,000).
SSA faces backlashes for email
On July 4th, the Social Security Administration (SSA) sent out an email to its beneficiaries celebrating the passage of the One Big Beautiful Bill Act, adding that it “eliminates federal income taxes on social security benefits for most beneficiaries, providing relief to individuals and couples.” As a result, many beneficiaries were confused as to the validity of this statement, whilst former SSA officials criticized the framing of the bill in this manner.
Subsequently in late July, Senator Elizabeth Warren met with SSA Commissioner Frank Bisignano to discuss matters regarding Social Security. During this interaction, Commissioner Bisignano took responsibility for the misleading email that was sent to beneficiaries regarding the new bill.
“In the meeting with Senator Warren, Commissioner Bisignano revealed that his team at SSA was responsible for the initial email. He confirmed that it was discussed with the White House, but admitted that he didn’t know whether it had been run by SSA’s Office of General Counsel (OGC) before it was sent out to all beneficiaries. When Senator Warren asked whether he planned to send out a correction to all beneficiaries given the inaccurate and misleading information provided to them about their benefits, Bisignano said he did not know why they had not initially sent out a correction but believed the email had “aged” and did not require a follow-up,” as per Sen. Warren’s press release.