President Trump’s recently signed “big, beautiful bill” has created uncertainty about whether most Americans will still need to pay federal income taxes on their Social Security benefits.
“It’s a mixed bag for seniors. Some will see tax relief, but the cost is ultimately borne by the Social Security system itself,” explained Alex Lawson, executive director of Social Security Works, in an interview with USA Today.
The legislation, signed into law on Saturday, includes a $6,000 tax deduction for Americans aged 65 and older. After the bill passed Congress, the Social Security Administration released a statement highlighting that the law “delivers long-awaited tax relief to millions of older Americans.” The agency claimed the provision “eliminates federal income taxes on Social Security benefits for most beneficiaries” and enhances deductions for retirees.
However, tax policy experts warn that the bill does not directly eliminate taxes on Social Security benefits. “There’s no provision in the budget bill that actually ‘eliminates’ or even reduces taxes on Social Security income,” said Howard Gleckman, senior fellow at the Tax Policy Center, to the Washington Post.
Trump’s bill provides a $6,000 deduction for seniors earning up to $75,000 individually or $150,000 jointly. This deduction phases out for higher earners and ends entirely for individuals making over $175,000 or couples earning more than $250,000. Additionally, the new deduction is temporary and set to expire within a few years.
Critics argue that the primary beneficiaries are wealthier seniors. “Those who benefit are, by definition, higher-income individuals, and the biggest winners are the wealthiest,” said Bobby Kogan of the Center for American Progress in a statement to CBS News.
Before the bill’s passage, 64% of seniors paid no tax on Social Security due to existing exemptions. Trump’s bill raises that figure to 88%, largely because of the increased standard deduction for seniors, explained Marc Goldwein of the Committee for a Responsible Federal Budget.
Still, the impact for lower-income seniors is limited because many already pay little to no federal taxes. “It’s been marketed as major tax relief for seniors, but a lot of them will be surprised to find it doesn’t apply,” said Garrett Watson, senior policy analyst at the Tax Foundation.
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