President Donald Trump repeatedly promised on the campaign trail that he would eliminate taxes on Social Security benefits. Now, his administration claims he has delivered on that promise with the passage of the One Big Beautiful Bill Act. A July 4 article posted to the White House website heralded the bill’s passage and said it meant “NO tax on Social Security.”
However, financial experts say the bill doesn’t change how Social Security is taxed. Instead, the White House seems to be using a temporary senior deduction included in the bill to justify its claim.
“It doesn’t have a direct impact on Social Security,” according to Martin Baker, financial advisor and director of financial planning for Canby Financial Advisors in Framingham, Massachusetts.
Here’s a look at what the OBBB really means for Social Security taxes.
[READ: Trump Proposed Eliminating Social Security Taxes. Here’s the Bill That Could Make It Happen]
Bonus Deduction Benefits for Those Age 65 and Older
While the OBBB doesn’t include any provisions that directly affect Social Security benefits or their taxation, it does include a “temporary senior deduction.”
“I would assume that the point of view of the White House is that this makes up for that tax on Social Security,” says Corey Pederson, a wealth strategist with Crewe Advisors in Salt Lake City.
Referred to as a bonus deduction by some, it provides an additional $6,000 deduction to taxpayers who are 65 or older at the end of the tax year. For a married couple filing jointly, the deduction equals $12,000.
However, the deduction is not tied to Social Security and can be claimed by anyone who meets age and income eligibility guidelines.
“You could be 65 years old, claim this additional deduction and not receive Social Security until age 70,” says Jaime Eckels, a certified financial planner and partner with Plante Moran Financial Advisors in Auburn Hills, Michigan.
Who Qualifies for the Senior Bonus Deduction?
To receive the additional senior deduction, taxpayers must be at least 65 years old and have an income that falls within a certain threshold.
People don’t need to receive Social Security benefits to claim the bonus deduction, Baker says. It just happens that most people who qualify for the deduction are also eligible for Social Security.
Meanwhile, some people who receive Social Security won’t be eligible for the bonus deduction. Those who claim early retirement benefits between ages 62 and 64 won’t receive additional tax savings.
In addition to being at least age 65, people must meet income requirements to qualify for the senior deduction. To receive the full amount, a taxpayer’s modified adjusted gross income must fall below the following amounts:
— Single taxpayers: $75,000
— Married couples filing jointly: $150,000
Modified adjusted gross income is a taxpayer’s adjusted gross income with certain deductions added, such as IRA contributions, student loan interest and self-employment tax, among others.
Those with incomes greater than the above amounts may still qualify for a reduced senior bonus deduction. The extra deduction is phased out at higher incomes until it is completely eliminated for those with incomes greater than $175,000 for single taxpayers and $250,000 for married couples filing jointly.
“That’s a very nice benefit, but it’s very temporary in nature,” Eckels says. Seniors can only claim the extra deduction for tax years 2025 to 2028.
[Read: How Raising the Retirement Age Could Help or Hurt Seniors]
Did Trump Eliminate Taxes on Social Security?
While the OBBB may save seniors money, it doesn’t eliminate taxes on Social Security, and some people will continue to pay taxes on their benefits. The White House calculates that 88% of seniors “will pay no tax on their social security income as a result of deductions exceeding taxable social security income.”
“There are already a number of people who don’t pay taxes on benefits,” Baker notes. These are typically low-income seniors.
Social Security benefits are taxed based on a formula that combines the following:
— Adjusted gross income
— Half of annual Social Security benefits
— Tax-exempt interest income
If a person’s combined income exceeds a certain threshold — $25,000 for single taxpayers or $32,000 for married couples filing jointly — then up to 85% of Social Security benefits may be subject to income tax.
“That additional deduction will then offset any tax due on Social Security,” Baker says, but it won’t eliminate it for everyone.
“Generally, if you’re a middle-income (household) of $80,000 to $120,000, you’ll see significant tax benefits from this,” Pederson says.
Deduction May Fall “Below the Line”
Assuming the senior bonus deduction is applied in the same way as other standard deductions, it won’t reduce a person’s adjusted gross income or their modified adjusted gross income.
“It’s below the line, (and) I don’t want people to be confused by that,” Eckels says. Below the line refers to adjustments that occur on a tax form after a person’s adjusted gross income is calculated.
That’s an important distinction because adjusted gross income and modified adjusted gross income are used to determine eligibility for Roth IRA contributions, tax credits and subsidies for health insurance coverage purchased on the government marketplace, among other things. A person’s modified adjusted gross income also determines if they pay higher premiums for their Medicare coverage, while the adjusted gross income is included in the calculation for whether Social Security benefits are taxed.
The OBBB will undoubtedly save some seniors money on their taxes, but financial experts say it’s not accurate to say that the bill eliminates taxes on Social Security. They also point to the temporary nature of the deduction as a reason for retirees to consider waiting before adjusting their tax withholding.
“I wouldn’t do it right away,” Eckels advises. “I would see how things play out.”
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Trump’s Big Beautiful Bill: What It Really Means for Social Security Taxes originally appeared on usnews.com
