If you're a senior on Social Security, you may have heard claims that 88% of seniors on Social Security will no longer owe taxes on their benefits now that the "One Big, Beautiful Bill" (OBBB) has passed. The White House wasted no time in declaring this a victory and a follow-through on President Trump's campaign promise to end Social Security benefit taxes for seniors.
It's true that the OBBB includes a significant tax change that could help you save more of your hard-earned cash. But the fine print reveals some significant deviations from what President Trump initially promised. Understanding the four things below is crucial if you want to avoid being caught off guard at tax time.
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1. It only applies to those 65 and older
The OBBB added a new $6,000 senior tax deduction ($12,000 for married couples) on top of the standard deduction and the existing senior deduction. However, the new OBBB deduction only applies to those 65 and older.
That means seniors aged 62 to 64 who are claiming Social Security won't notice any difference in their taxes. But it also means that you could save money if you're 65 or older, even if you haven't signed up for Social Security yet.
2. High earners won't qualify for this deduction
The OBBB senior deduction has income phaseouts that limit the tax savings available to high earners. Single adults with incomes under $75,000 and married couples with incomes under $150,000 are eligible for the full credit.
Those with incomes over these thresholds will lose $60 from the credit for every $1,000 their income exceeds the limit for their filing status. For example, a single adult with a $76,000 income would only qualify for a $5,940 credit. Single adults with incomes over $175,000 and married couples with incomes over $250,000 won't be eligible for any additional deduction under the OBBB.
3. It doesn't actually end benefit taxes
The White House press release said that 88% of seniors on Social Security wouldn't owe taxes on their retirement or spousal benefits with this new deduction. They calculated this by adding up the total deductions seniors would qualify for and comparing it to the taxable portion of their benefits. If the deductions were greater than the taxable portion of their benefits, then these individuals were considered not to be paying taxes on their benefits, according to the Council of Economic Advisors report cited in the White House article.
But the truth is, the OBBB didn't eliminate or modify Social Security benefit taxes at all. They're still on the books, and if you have taxable Social Security benefits, you're definitely paying taxes on them.
The new senior deduction may offset some of these taxes a little. But since the thresholds for benefit taxation haven't changed since the 1980s, more people find themselves owing taxes on their benefits every year. That's going to continue, even now that the OBBB passed.
4. It's temporary for now
The new senior deduction is taking effect in the 2025 tax year and will apply for the remainder of President Trump's second term in office. But right now, it's scheduled to expire at the end of 2028. At that point, Congress will have to decide whether it wants to extend what the OBBB currently refers to as the "Temporary Senior Deduction" for future years.
So, it's possible that later on in your retirement, you may need to brace yourself for a higher tax liability if the OBBB senior deduction goes away. That's something to keep an eye on as 2028 approaches.
In the meantime, you can look forward to savings on your 2025 tax bill as long as you're at least 65 and are below the income thresholds listed above. If you want a better idea of how it will affect your taxes specifically, consult with an accountant who can give you personalized advice.
