No federal taxes on Social Security benefits. That was one of the key campaign promises made by Donald Trump when he ran for president last year. When the president called for "one big beautiful bill" to enact his domestic policy agenda, many retirees might have expected that this tax cut would be one of the prominent changes included.
President Donald Trump got his One, Big, Beautiful Bill. It was passed on Thursday by one vote in the U.S. House of Representatives. However, there was no mention of cutting taxes on Social Security benefits. So far, the president hasn't fulfilled his campaign pledge. Here's what retirees can expect instead.
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Why hasn't Trump delivered on his campaign pledge?
There's no indication that the president has reversed course on his goal to eliminate federal taxes on Social Security benefits. So, why hasn't Trump delivered on his campaign pledge yet? One hurdle is procedural.
The One, Big, Beautiful Bill Act (yep, that's the name of the legislation) must go through the budget reconciliation process in the U.S. Senate. This process requires only a simple majority to pass legislation, instead of the typical 60 votes. However, the Byrd Rule prevents budget reconciliation bills from including any changes to Social Security.
Trump's other challenge is political. Democrats and some conservative Republicans don't think the One, Big, Beautiful Bill is all that beautiful. Even some legislators who might favor halting federal taxes on Social Security could oppose the bill because of its other components.
Getting rid of federal taxes on Social Security benefits also comes at a steep cost. The Wharton School of the University of Pennsylvania estimates that this change would reduce revenues by $1.5 trillion over 10 years. It would increase the federal debt by roughly 7% by 2054. The move would also cause the Social Security Trust Fund to run out of money two years sooner than currently projected.
What retirees might get instead
If the One, Big, Beautiful Bill Act becomes law, retirees might receive a consolation prize. The legislation includes an "enhanced deduction for seniors" that some have dubbed a "senior bonus."
The standard federal deduction for 2025 is $15,000 for single filers and married individuals who file separately and $22,500 for those who file as head of household. Anyone married filing jointly receives a standard deduction of $30,000.
Taxpayers aged 65 and over can already receive an even higher standard deduction. If you're single or file as head of household, your standard deduction increases by $2,000. If you're married (filing jointly or separately), your standard deduction will be $1,600 higher for each qualifying individual.
The One, Big, Beautiful Bill includes provisions to boost this senior standard deduction to $4,000 for Americans 65 and older. Even seniors who itemize deductions and don't use the standard deduction can still take advantage of this increase.
There are two catches, though. First, the additional deduction for seniors is reduced if modified adjusted gross income (AGI) is greater than $75,000 for individuals and $150,000 for couples. Second, the extra deduction will be in place only through Jan. 1, 2029.
Don't count your chickens before they hatch
To be sure, the "senior bonus" in the GOP legislation won't help retirees nearly as much as eliminating federal taxes on all Social Security benefits would. However, it could leave some retirees with a little more money in their pockets.
But the One, Big, Beautiful Bill Act still has a tough road ahead to become law. Some Republican senators have said they won't vote for legislation unless significant changes are made. There are probably no Democratic senators who will vote for the bill because of its impact on social programs, including Medicaid.
As the old saying goes, "Don't count your chickens before they hatch." It's quite possible that retirees won't get a cut in federal taxes on Social Security benefits or an extra deduction.
