As many people may remember one of Donald Trump’s campaign promises during the 2024 election was that he would eliminate taxes on social security. That did not happen. Instead, the recently enacted One Big Beautiful Bill Act (P.L. 119-21) (“Act”) provides for a $6,000 deduction for individuals over age 65 ($12,000 for married filing jointly if both are over age 65). The new deduction is a stand-alone deduction that is not dependent upon whether the person has any income from social security. For instance, someone age 65 in 2025 who is deferring taking social security until age 70 would still receive the deduction, subject to a phase-out based on their income level. The deduction is subject to a phase-out for single taxpayers with income over $75,000 and married couples with income over $150,000.
According to the White House, an analysis from the Council of Economic Advisers estimates that about 88 percent of seniors will pay no tax on their social security income as a result of the combination of the new deduction and other applicable deductions. That implies that 12% of seniors may still be required to pay taxes on their social security income.
Who will receive the least benefit from the new deduction? Individuals who take social security benefits before age 65 or those whose income exceeds the phase-out limits will receive no benefit from the new deduction. As most people are aware, individuals may take social security at age 62 at a lower benefit amount than if they took social security at the normal retirement age. Those individuals will not only receive a lower social security benefit but also may be subject to tax on that benefit without receiving the new deduction until they reach age 65 – if it is still available at that time.
Note that the new deduction is only available for the years 2025 through 2028 and expires after 2028. Accordingly, anyone who is 61 years old or younger in 2025 will not receive that deduction (unless such deduction is renewed).
Who receives the most benefit from the new deduction? Persons who are 65 or older who are able to manage the type and timing of their income (e.g., tax exempt income, dividend income, interest income and capital gains) and the timing of deductions and losses to offset such income and gains during the years the new deduction is in effect to keep their income under the income limits for the new deduction will benefit the most from the new deduction.
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