When the “One Big Beautiful Bill Act” passed, the Social Security Administration (SSA) made an announcement that turned a lot of heads. In it, they stated:
“The new law includes a provision that eliminates federal income taxes on Social Security benefits for most beneficiaries”1
That line spread quickly — and so did the criticism. Many news outlets called it confusing and misleading. The SSA later updated the post to provide some clarification, but it still left plenty of unanswered questions.
So, let’s clear the air.
The new law does not repeal taxes on Social Security benefits. It also doesn’t change the formula that determines how much of your benefits are taxable (the provisional income rules).
What it does do is create a temporary, age-based tax deduction for seniors starting in the 2025 tax year — and lasting through 2028.
Who Qualifies?
- You must be age 65 or older by the end of the tax year.
- You do not have to be collecting Social Security to qualify.
- If you’re under 65, even if you’re collecting Social Security, you won’t get the deduction.
- The deduction is age based, not Social Security status based.
How Much Is the Deduction?
- Up to $6,000 per eligible person.
- Married couples where both spouses qualify could get up to $12,000.
Income Limits (Phaseouts)
There are income phaseouts for this extra deduction. The deduction is reduced by 6% of MAGI above:
- $75,000 for single filers
- $150,000 for joint filers
That means:
- Single filers with MAGI of $175,000 or more get no extra deduction.
- Joint filers with MAGI of $250,000 or more get no extra deduction.
Stacking With Other Deductions
This “bonus” deduction is in addition to your standard or itemized deductions.
Example: A senior couple using the standard deduction in 2025 could deduct up to $46,700 ($34,700 standard deduction + $12,000 senior deduction).
Things to Keep in Mind:
- There’s no inflation adjustment in the law for the deduction amount or the phaseout thresholds.
- The deduction is temporary — it’s only available from 2025 to 2028.
Planning Opportunities
- Roth conversions: Seniors under the phaseout could use the extra deduction to convert more IRA dollars to Roth at a lower tax rate.
- Timing income: If you’re nearing age 65, you might delay certain income or accelerate deductions to take advantage of the deduction once it’s available.
- Qualified Charitable Distributions (QCDs): These lower MAGI, which can reduce Social Security taxes and Medicare IRMAA surcharges.
- Filing status considerations: A recently widowed person can potentially claim the full $12,000 senior deduction in the year their spouse passes away.
Visit our OBBBA resources page dedicated to providing insights that will help you understand OBBBA’s provisions and how they may impact your finances.
Our financial planning team can help you understand how this new deduction — and other recent tax law changes — might affect your retirement income strategy.
1.Social Security Applauds Passage of Legislation Providing Historic Tax Relief for Seniors | SSA
