I received an email from Social Security Administration on July 3, applauding the new 2025 Trump tax law — One Big Beautiful Bill Act. The email said,
I read the One Big Beautiful Bill Act. This part is not true. The new 2025 Trump tax law doesn’t eliminate federal income tax on Social Security benefits. It raised the standard deduction and created a new temporary senior deduction, but Social Security is still taxable just as before.
Temporary Senior Deduction
The email from Social Security Administration continued to say:
Additionally, it provides an enhanced deduction for taxpayers aged 65 and older, ensuring that retirees can keep more of what they have earned.
This part is true, but the email omitted the fact that the enhanced deduction is only temporary, and it has nothing to do with Social Security anyway.
One Big Beautiful Bill Act created a new $6,000 senior deduction, available only from 2025 through 2028, to seniors 65 and older during those years. It doesn’t matter whether you’re receiving Social Security or not. It doesn’t matter whether you’re even eligible for Social Security or not.
Unrelated to Social Security
If you’re 62 and receiving Social Security, you don’t qualify for this new senior deduction because you’re not 65 yet. Your Social Security is taxable just as before.
If you and your neighbor are both 65, and you’re receiving Social Security but your neighbor isn’t eligible for Social Security because they didn’t pay into it, both of you qualify for this new senior deduction. If you and your neighbor have the same income outside Social Security (pension, interest, dividends, capital gains, etc.), you’ll pay higher taxes than your neighbor when you add your taxable Social Security benefits on top.
If you’re 65 this year and you’re delaying your Social Security, you still qualify for this new senior deduction. When you claim your Social Security next year at 66, your taxes will increase due to the added income from Social Security, which is taxable just as before the 2025 Trump tax law.
Not a Tax Credit
The $6,000 senior deduction is a tax deduction, not a tax credit. It reduces your taxable income by $6,000 ($12,000 if you’re married filing jointly and both of you are 65+). It doesn’t lower your taxes by $6,000 or $12,000.
How much this tax deduction lowers your taxes depends on your AGI and what your AGI is made up of. It can be 0%, 10%, 12%, 15%, 22%, 27%, or anywhere in between. Most people see a 12% benefit. A $6,000 deduction translates into $720 in tax savings. A $12,000 deduction for a married couple both 65 or over lowers their taxes by $1,440.
No Change to AGI
The new temporary senior deduction goes after the standard deduction or itemized deductions. It’s available whether you itemize or not. It’s not part of the standard deduction. It doesn’t replace the existing increase in standard deduction for age 65.
However, it doesn’t lower your AGI. It doesn’t make it easier for you to qualify for things keyed off of the AGI, for example, avoiding higher Medicare premiums under IRMAA. It doesn’t lower state taxes.
No Change to Tax on Social Security
The new senior deduction is just an extra tax benefit for seniors. It has nothing to do with Social Security. It doesn’t remove taxes on Social Security. The new extra tax benefit may be worth more or less than the tax on your Social Security benefits. You have the new tax benefit on one side and the tax on Social Security on the other side. The two are completely unrelated.
It’s like some people saying they picked up $5 on the street and therefore their coffee is free. The two things have nothing to do with each other. You don’t have to buy coffee after picking up $5. The coffee still costs the same whether you picked up $5 or not. The coffee may be more or less than $5. Picking up $5 is nice, but the coffee still isn’t free.
Please use my calculator How Much of Your Social Security Benefits Is Taxable? to find out how much of your Social Security benefits is taxable. The new 2025 Trump tax law didn’t change any of that calculation.
Income Phaseout
Not only is the new senior deduction temporary, but it also phases out as your income goes up. You get the full $6,000 deduction if you’re single and your modified adjusted gross income is $75,000 or less ($150,000 or less for married filing jointly). You get $0 deduction if you’re married filing separately, regardless of your income.
The modified adjusted gross income is the AGI for most people. It doesn’t add back untaxed Social Security or muni bond interest. The “modified” part is only for foreign earned income exclusion and residents in Puerto Rico, Guam, American Samoa, and the Northern Mariana Islands.
As your income goes up, each person’s deduction is reduced by 6% of any additional income above the $75,000/$150,000 threshold. The deduction disappears when your income reaches $175,000 if you’re single or $250,000 if you’re married filing jointly.
The tables below illustrate how the deduction phases out at different income levels. Interpolate when your income is between the numbers shown in the tables.
Single
| Income | Senior Deduction |
|---|---|
| $75,000 or less | $6,000 |
| $85,000 | $5,400 |
| $95,000 | $4,800 |
| $105,000 | $4,200 |
| $115,000 | $3,600 |
| $125,000 | $3,000 |
| $135,000 | $2,400 |
| $145,000 | $1,800 |
| $155,000 | $1,200 |
| $165,000 | $600 |
| $175,000 or above | $0 |
Married Filing Jointly
| Income | One Person Is 65+ | Both Are 65+ |
|---|---|---|
| $150,000 or less | $6,000 | $12,000 |
| $160,000 | $5,400 | $10,800 |
| $170,000 | $4,800 | $9,600 |
| $180,000 | $4,200 | $8,400 |
| $190,000 | $3,600 | $7,200 |
| $200,000 | $3,000 | $6,000 |
| $210,000 | $2,400 | $4,800 |
| $220,000 | $1,800 | $3,600 |
| $230,000 | $1,200 | $2,400 |
| $240,000 | $600 | $1,200 |
| $250,000 or above | $0 | $0 |
Effect on Roth Conversion
Many seniors 65 or older do Roth conversions. If a Roth conversion puts your MAGI in the income phaseout range, it increases the tax cost of your Roth conversion.
If you’re single or if you’re married but only one of you is 65+ and you’re in the 22% tax bracket, the tax cost for your Roth conversion goes from 22% to 22% * 1.06 = 23.32%. If you’re married and both of you are over 65, it goes from 22% to 22% * 1.12 = 24.64%.
Roth conversion is always about the tax rate you’re paying now versus the tax rate you expect to pay in the future if you don’t convert as much. If you think it’s still worth converting at 23.32% or 24.64%, you would continue converting the same amount, ignoring the effect on the senior deduction. If you think it’s not worth it to convert at 23.32% or 24.64% (but it’s worth it to convert at 22%), you would convert only enough to $75k or $150k AGI to get your full senior deduction.
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John says
Harry, the Executive branch of our government is never wrong anymore. It must be Congress that made the mistake.
TT says
The truth has become subjective. I wonder how the head of SSA felt about having to send out this “rah-rah” missive.
Laurel says
He most likely initiated it. He had to google what the job was when it was offered to him.
https://abcnews.go.com/US/new-head-social-security-hired-wall-street-tells/story?id=122075152
Mary says
Harry, thanks for doing the calculations and providing this information. As MFJ both 65+ it is very helpful to know the numbers to benefit from the ‘bonus’ senior deduction while still avoiding IRMAA. Thanks again, Mary
Bill Jackson says
Thank you for this valuable information, it’s what I’ve been looking for since the stories about Social Security being untaxed surfaced. It ties together my recent queries into the matter. Why would our government mislead us like this? Thanks, Bill J
Katie W says
Thank you so much for sharing the truth about this particular provision in the new billionaire tax relief bill. I received the SSA email and it infuriated me because it is so untruthful and misleading so I was happy to read your accurate analysis.
Thanks!
Mike ODonnell says
I am not a financial or legal professional, but in my reading of the bill, there is nothing that says married filing separately do not qualify for this bonus senior deduction. I would love clarification on this.
Harry Sit says
The law has this clause:
“(v) MARRIED INDIVIDUALS.—If the taxpayer is a married individual (within the meaning of section 7703), this subparagraph shall apply only if the taxpayer and the taxpayer’s spouse file a joint return for the taxable year.”
Mike ODonnell says
Wow. Thank you, Harry; I missed that clarifying clause!
RobI says
Thanks for highlighting this. Its a surprise as I’ve seen zero reporting on this in the media. I was about to start seeing if filing separately would be worthwhile in 2025 with one high and one smaller income, but its clearly not allowed.
Ted says
Is the “MFJ, both 65+” table correct? I thought the deduction is phased-out completely at
$250,000 even for that group.
Harry Sit says
After reading the law again, I see the senior deduction would be reduced for both spouses for the same additional income above $150,000. Therefore it phases out twice as fast as for singles. I corrected the table.
Todd A. says
I had the same question…everything I have read shows that the deduction phases out completely at $250K, whether one or both spouses is 65+. Can you comment please?
Steve Pearce says
Which MAGI are the phase-outs of the senior deduction based on? Will Roth Conversions impact it?
Harry Sit says
Roth conversion increases the AGI and lowers the deduction if the higher AGI enters the phaseout.
ReaderInCA says
FYI from Bogleheads forum this morning after a link to your article was posted:
https://www.bogleheads.org/forum/viewtopic.php?p=8431302#p8431302
“The phase out table IS incorrect in that article for both 65+. Mathematically, the only way to phase out $12K for joint income going from $150K to $250K is to reduce the joint bonus by $120 per thousand of income above $150K. Finance Buff has the full phasout incorrectly at $350K for MFJ because he is only reducing the joint bonus by half that rate.”
Harry Sit says
I corrected it now.
Tom says
If all your income is from Social Security and you are paying taxes on some of that, then the new deduction has to reduce your Social Security taxes paid. This also reduces the inflows to the Social Security trust fund.
Harry Sit says
If all your income is from Social Security, even at the maximum level, the linked calculator shows that the taxable portion of Social Security is below the standard deduction before this new senior deduction. The federal income tax was already zero. This new deduction has no effect.
Virginia says
Thank you so much for this post. Have been waiting for the specifics to be put in simple to understand terms. I rely on you as my #1 “go to” for financial info.
Ray says
My wife got this “notice” first and I told her it was obviously spam, because I knew it wasn’t factual. Then I found mine, appropriately I thought, in my spam folder! We are all used to politicians lying to us, but I can’t recall ever receiving a message from a government agency that deliberately misleads for political purposes.
ROS says
RAY,
Don’t sign up for the Social Security emails then. You would have gotten an email from them listing all the accolades of the BIG BEAUTIFUL BILL.
Bill says
Just wondering what the IRS will use to figure your Senior Deduction? Probably the AGI from your most recent Federal Tax Return?
Harry Sit says
It’s based on the current year’s AGI, plus some adjustments for foreign earned income, income from Puerto Rico, Guam, etc., but most people don’t have those adjustments.
Coriander says
Thanks for this information! One further issue I’m hoping you can clarify – I’ve seen some sources saying this will be an increase in the standard deduction, meaning it will not be available to those who itemize (which will be a larger number of taxpayers, due to the SALT increase). I’ve seen other sources saying it will be a separate deduction, and will be available to those who itemize. Do you know which is correct?
Harry Sit says
It’s a separate deduction. It doesn’t matter whether you use the standard deduction or itemized deductions.
Kevin says
Thanks, Harry. On-point, as always. Looking forward to your update on Affordable Care Act, Health Savings Accounts and Premium Tax Credit expiration.
Audrey says
I thought the phaseout for MFJ ended at $250K
Audrey says
I see already corrected. For some reason I don’t get any updates or see comments until I myself post a comment!
Ros says
Harry THANK YOU.
I do have a question. This income amount is on line 11 of our 1040 correct.
We do not have to add the untaxable SS amount back in. Correct?
Harry Sit says
The income is the AGI for most people. No adding back non-taxable Social Security or muni bond interest. See reply to Bill in comment #12 above. I also added a small paragraph in the post.
Steven says
Harry, I greatly appreciate your matter-of-fact description of this topic. It’s the first clear, concise and accurate summary I have read. The intentional misrepresentations during discussion of this bill (and still ongoing), are disappointing to say the least.
Ouzel says
Thank you for this information, Harry.
Bill says
It looks like this Senior Deduction is enabled and takes affect starting tax year 2025. Would that mean the Senior Deduction for 2025 is arrived at after your 2025 AGI is calculated? That gives you no heads up and makes it difficult pre-planning for next year taxes.
Harry Sit says
It’s calculated at the time of doing the tax return, just like any other deduction with a phaseout. You project your AGI and that’ll give you an estimate of your deduction.
Ros says
One more question.
I read that the deductions for dependents will be eliminated.
And in an AARP article that seniors will average paying $570 more.
Harry Sit says
The dependent exemption was already eliminated since 2018. The new law made it not come back.
GeezerGeek says
Harry, Thanks for the clarification.
Trump promised during his campaign to eliminate the tax on Social Security. He is now saying that the One Big Beautiful Bill (OBBB) eliminated taxes on Social Security. The email from Social Security Administration just repeats Trump rhetoric. Some have said that the email is a violation of the Hatch Act, the federal law that restricts partisan political activities of federal employees.
As for me, my income is over the phase out so I will see no reduction in taxes for 2025 from the OBBB except for the increase in the Standard Deduction for MFJ from $30,000 to $31,500, a tax saving of $330 for my tax bracket. Of course, I will see a benefit in 2026 since the 2017 reduction in tax bracket rates is now “permanent”. However, as Powell said, the present situation with the national debt increasing faster than the GDP is “unsustainable”. In the future, who knows when, tax rates will have to increase. The OBBB just makes “in the future” not so far “in the future”.
Jorge says
Harry,
I have cash so I can manage my income. I turned 65 this year. You make it sound like the BBB has ZERO things to take advantage of, for the people that can. This is not true. I’m a retired engineer so I don’t get offended by politicians lingo – I just fire up my mental CPU.
I can manage my income to take advantage of the temporary deductions enhancements, plus still perform some ROTH conversions.
I always appreciate your posts though.
-Jorge
Harry Sit says
I didn’t say it has zero things to take advantage of. I did say the new senior deduction is an extra tax benefit for those who qualify. Only it has nothing to do with Social Security, because many people receiving Social Security don’t qualify, and many people not receiving Social Security still qualify. For those who both receive Social Security and qualify, the deduction bears no relationship with the amount of their Social Security being taxed.
Picking up $5 on the street is nice. The coffee still isn’t free.
GeezerGeek says
Jorge,
I think the point that Harry is making is summarized by the title of the article: “Social Security Is Still Taxed Under the New 2025 Trump Tax Law”. Harry was responding to what was stated in the email from Social Security, which stated that the BBB does reduce Social Security Taxes. He clearly points out that there is “a new $6,000 senior deduction, available only from 2025 through 2028, to seniors 65 and older” but that that deduction is available whether you are on SS or not, so it isn’t a SS tax deduction. So, he didn’t say that there are “ZERO things to take advantage of”. There are several significant tax reductions in the bill, but they are not a reduction in the tax on Social Security.
Bill says
I’ve seen two versions of the senior deduction. The existing single senior deduction is $2000. Version #1 is yours that the new deduction will be $6000. Version #2 is that the new deduction will be an additional $6000 which works out to be $8000. Which is correct?
Harry Sit says
The existing $2,000 is part of the standard deduction. People who itemize don’t get it. This $6,000 doesn’t replace the $2,000. It’s a separate deduction from the standard deduction or itemized deductions. You still get it whether you use the standard deduction or itemized deductions.
Jorge says
I love coffee.
I don’t mind if you Zelle me the $5 you found. I don’t need it but I would take it.
😀
Jorge
Involute says
Harry, thank you for reading the BBB. Thank you for your clear and complete report. I had already looked for an explanation, but came away confused. The clarity of your report beats all the rest.
Barry says
Will this new deduction affect state income taxes in any way? I assume not as states, at least my state, CA, has its own standard deduction unrelated to the federal one.
Harry Sit says
It doesn’t affect state income taxes. Many states use the federal AGI as a starting point. This deduction doesn’t change the federal AGI.
MDM says
I’ve taken a stab at incorporating the applicable portions of the new tax laws into the Case Study Spreadsheet. See https://forum.mrmoneymustache.com/forum-information-faqs/case-study-spreadsheet-updates/msg3373641/#msg3373641 for more. Feedback appreciated (there or here) if any mistakes noticed.
Tom says
The government has some kind of algorithm to determine how much of your taxes are on Social Security benefits because they direct those to the trust fund.
I bet the deduction does reduce that amount. It can move some income to a lower tax bracket.
Don Goldberg says
Thank you, Harry, for reading the statute closely so I don’t have to.
However, I would quibble with your analogy to “finding $5 on the street.” Given the whole picture of this budget bill, It’s more like being handed $5 from a bully who stole $1000 from a sick neighbor on the way to the doctor.
Julie says
Absolutely!
It’s very disturbing that the SSA is misleading us.
Jim P. says
At first, I considered the $12,000 deduction for a couple to be miniscule, especially since the phase out will put us closer to $6,000. But looking at our specific case, our Social Security benefits will be taxed way closer to $0 than I thought. Relevant deductions/exemptions:
1. Our first $31,500 + $3,200 will be exempt from taxation via standard & senior deductions. For the sake of 1BBB, I’ll consider that as applying solely to our SS income.
2. At least 15% of our Social Security benefits is exempt from taxation, that’s $8,400 on roughly $56,000 received.
3. The 1BBB “Social Security Deduction” will be about $6,000 for us, because we’re Roth converting traditional IRA’s like crazy before RMD’s kick in.
This is not the beautiful “SS will not be taxed” that I was promised, but $49,100 out of the $56,000 we receive will not be taxed. And if we decide to limit our IRA redemptions, we could keep our AGI at $150k, meaning a total of $55,100 would not be taxed.
As a rich MF’er, I can’t ask for much more.
Don Goldberg says
Couldn’t ask for more? You could ask for a broader perspective than just your own tax bill and have a little concern for your neighbors who are having their health care pulled or are being kidnapped in the streets or at work.
paul sullivan says
Loved this posting! Loved that you stated that’s AGI what we’re talking about for this deduction and the phase out table.
Thanks, Paul
Ed Perry says
Income is ambiguous. Does this new senior deduction reduce taxable income, leaving AGI and MAGI unchanged?
Harry Sit says
Please read the section under “No Change to AGI.”
John A says
That’s helpful information, but I’m not sure it directly refutes the claim you cited: “The new law includes a provision that eliminates federal income taxes on Social Security benefits for most beneficiaries, providing relief to individuals and couples.”
If most beneficiaries only have SS income and would otherwise pay $6,000 or less in federal income taxes, it’s true. I don’t know how many recipients fall into that category, but those are the facts that would show the statement to be accurate or not.
Jeff Enders says
John – if a taxpayer only has SS income, there is no tax liability in any event. In fact, if someone’s only income is SS, there is no need to file a tax return. This population gained no benefit from the Senior deduction.
And this is a “deduction” not a “credit”. For someone in the 10% tax bracket, a $6,000 deduction is worth $600. Paying less than $6,000 in taxes is not the correct way of looking at this.
Harry Sit says
The $6,000 senior deduction is accounted for in the next sentence in the email that starts with “Additionally.” When that’s excluded by “additionally” I don’t know what the prior sentence is referring to. There’s no such thing in the new law.
Jim P. says
The key words are “most beneficiaries.”
If a beneficiary couple’s total income is from Social Security benefits, they will not owe Federal income taxes if their benefit is $54,941 or less. Over that number, they start paying 10% tax. Since few recipients receive $55,000 in SS benefits, I grade the SSA’s statement as VALID.
GeezerGeek says
If you use that logic, you could also say that “The new law includes a provision that eliminates federal income taxes … for most ” illegal immigrants over the age of 65. That statement is every bit as true as the original statement from SSA, so it could also be graded VALID.
John A says
My rule when reading anything by a bureaucrat or other politician is to ask “How is this technically accurate while substantially false?” I think the post sufficiently covers the second element while not addressing the first. Again, it’s useful information, but a glancing blow on the SSA email.
Todd B. says
Thank you, Harry, for your detailed explanation of this complicated bill. To clarify, I have 2 questions. Say we have 160k AGI married filing jointly in the 22% bracket. If we convert 10k into Roth we would pay $2200 extra tax and lose $1200 in the bonus std deduction thus paying at a 34% marginal rate? And if we have an extra $10000 in tax-exempt income this would not be added to our modified AGI thus reducing the bonus std deduction? So we would get the $10800 at the 160k level?
Harry Sit says
Yes to both. Shifting income from taxable to tax-exempt is extra helpful when your AGI is in the phaseout zone.
Jeff Enders says
Todd – the Senior deduction is a DEDUCTION not a tax credit.
If you lose $1200 of the bonus deduction, then at a 22% tax rate, that is worth $264.
So an additional $10,000 of AGI (Line 11 of FOrm 1040), due to your proposed Roth conversion, would increase the Taxable Income (line 15) by $11,200 and the federal tax liability (line 24) by $2200+$264 compared to not doing the conversion.
That is a 24.64% marginal tax rate. ($2,464 / $11,200)
Harry Sit says
Sorry, not 34% marginal tax bracket, but it still adds to the tax on Roth conversion. Losing $1,200 in the senior deduction is equivalent to converting $11,200 otherwise. That makes the marginal tax rate 24.64% as Jeff showed.
Jeff Enders says
correction:
That is a 24.64% marginal tax rate. ($2,464 / $10,000)
K. Cooper says
Thank you, Harry! I *knew* your website would be the place to go to in order to learn the complete story, including how the phaseout of the $6,000 deduction will work. My spreadsheet for calculating/estimating income taxes now has that 6%-of-income-over-$150K reduction in place.
Such valuable work you do on our behalf!
Tom P says
Since I like to accurately predict my taxes in my OBBS (One Big Beautiful Spreadsheet), can anyone confirm how rounding takes place when reducing the $6,000 deduction for income over $150K for MFJ? For example: assume a fictitious AGI of $171,965, which is $21,965 above the limit. Multiply this by 6% and you get $1,317.90. If the rounding statement on page 223 of the OBBBA applies it looks like the “increase shall be rounded to the next lowest multiple of $100.” So, in this case would this round to $4,600 or $4,700? Thanks.
K. Cooper says
Tom, page 223 of OBBBA is about a different matter, the child-care credit. I don’t see where the section about the new $6,000 deduction for seniors (pages 218-221) specifies anything about rounding the 6% reduction between $150K and $250K for MFJ returns.
Tom P says
Yeah, I saw that child-care credit too. Guess I’ll just assume it can be rounded to the whole dollar for now. Not a big deal.
GeezerGeek says
The IRS will let us know. Congress makes the rules, but the IRS decides how to apply the rules.
Don Goldberg says
This “Senior Deduction” provides a modest benefit to well-off retirees. (Low income retirees receive minuscule benefit, if any.) Other parts of the “BBB” cuts off millions from health care and nutrition assistance and unleashes secret police to hunt down people at work or waiting for the bus. The deduction itself reduces money flowing into the Social Security trust fund, effectively stealing Social Security from future generations.
Congratulations, fellow boomers.
Tom P says
Incorrect Don. The “Senior Deduction” has ZERO, ZIP, NADA to do with Social Security and in no way reduces funds for that benefit. You don’t have to be on SS to collect it, just 65 or older and a tax payer.
Don Goldberg says
Perhaps there is some debate about whether this new deduction affects the Trust Fund. I read this in The NY Times article on the lying email from the Trumpified DOGEified SSA:
“The change will also weaken the program’s finances. Besides the payroll tax, the program’s lifeblood, the taxation of Social Security benefits adds revenue to the program’s trust funds. The taxation of benefits began in 1983, in an effort to stabilize Social Security’s finances, and is the type of measure that some policymakers say is needed again now.”
(Gift link)
https://www.nytimes.com/2025/07/06/your-money/social-security-tax.html?unlocked_article_code=1.Uk8.DZ3y.91pZR3hoAkAq&smid=url-share
Jeff Enders says
Don / Tom P – I think this is the issue:
1) Currently, all tax monies collected that relate to Line 6B (Taxable SS) on Form 1040 get funneled to the Medicare and SS trust funds. (I don’t know how the formula works.)
2) But on the margin, there are some taxpayers filing Single that have reportable income on Line 6B that results in taxable income on Line 15 of $6,000 or less.
3) Prior to BBB, some of the tax on that $6,000 would go to the Trust Fund.
4) Now, since there is an additional $6,000 Senior Deduction, the taxable income would be zero and no tax would be due. Hence, nothing would go to the Trust Fund.
5) The same logic can be applied to Taxpayers filing Joint who have taxable income of less than $12,000.
Nephew Sam says
The most ( 88%) of the beneficiaries statement in the email seems to be true, using Administration economists and numbers and assumptions.
I am not sure why you seem to claim that “The new law includes a provision that eliminates federal income taxes on Social Security benefits for ALL beneficiaries.” is false.
Harry Sit says
Which provision is it when the $6,000 senior deduction is covered by the next sentence “Additionally, it provides an enhanced deduction for taxpayers aged 65 and older, ensuring that retirees can keep more of what they have earned.”? It has to be something else. What is it?
Mark E says
While I wholeheartedly agree with statements that the SSA email was full of false and misleading information, I thought I would share something I recently learned regarding SS. The computation for determining the taxable amount of SS benefits includes taxable income such as IRA distributions, Capital Gains, Dividends and others. The higher the amount, the higher the percentage of SS is taxed at. When the total of those other items are zero, taxable SS is at about 4.5%. Take a $25,000 IRA distribution and SS is now taxed at over 29%. Both spouses take $25,000 distributions and SS is taxed at 57%. Add another $20,000 say of Capital Gains and you’re at over 78% of SS being taxed. Once your SS taxable amount is determined then all of those other items (IRA dist. etc.) are taxed at your tax bracket rate. I learned of this last year when having to start taking $50,000 distributions on an inherited IRA. Went from paying no tax to paying over $10,000 in taxes, everything else the same and staying within the 12% tax bracket each year.
Harry Sit says
Paying federal income tax while receiving Social Security is always due to having other income besides Social Security. You can see this effect by plugging various numbers into the calculator How Much of My Social Security Benefits Is Taxable?
The maximum Social Security benefits in 2025 is $5,108/month. That’s for someone having the highest income covered by Social Security for all 35 years and delaying claiming benefits to the latest possible age 70. A married couple both having the highest benefits of $5,108/month receive a total of $122,592 from Social Security. If that’s all their income, the calculator shows that $20,702 is taxable. This is well below the standard deduction for married filing jointly before this new senior deduction. This couple would pay zero tax on their $122,592 from Social Security already.
Now, when you pay tax because you have other sources of income on top of Social Security, you could say the tax is completely on those other sources, because you wouldn’t pay any tax when you have only Social Security. Therefore the $6,000/$12,000 senior deduction goes toward offsetting those other incomes. Your tax is lower (or drops to zero) when those other incomes are lower.
GeezerGeek says
Harry,
I’m confused by either the math or the terminology. For MFJ with an joint SS income of $122,592, 85% of that amount, $104,203, would be the taxable amount prior to taking any deductions. The deductions (not itemizing) would be $12,000 for the OBBB deduction, $31,500 for the enhanced OBBB standard MFJ deduction, and $3,200 for the over 65 for both filers. That would leave a taxable amount of $57,503 which would be taxed at 10% for the first $54,550 ($5,455 in taxes) and 12% for the remaining $2,953 ($354). That would mean that the tax bill for that couple would be $5,809.
Is there something I’m missing or is the calculator broke?
Thanks
Harry Sit says
It isn’t true that 85% of $122,592 would be the taxable amount prior to taking any deductions. You can try this official calculator from the IRS:
https://www.irs.gov/help/ita/are-my-social-security-or-railroad-retirement-tier-i-benefits-taxable
The official calculator isn’t as easy to use as my calculator but it gives the same result in the end. $20,702 out of $122,592 is taxable before taking the standard deduction.
GeezerGeek says
Harry,
Thanks for enlightening me. I had long forgotten about Worksheet 1 because the end result for me was always 85% of my SS income was taxable. I had created a copy of Worksheet 1 in Excel the first year I was on SS but I realized after year 1 of SS income, that the result of Worksheet 1 would always be that 85% of my SS income would be taxable. I simplified the rule in my mind to be either 0%, 50%, or 85% of SS income was taxable, dependent on your total income. Now after reviewing Worksheet 1 and seeing how the calculation is done, I realize the amount of SS that is taxable can vary from 0% to 85%.
Gindie says
Harry, you state that the new Senior Deduction will not affect AGI. However, I’ve seen multiple sites/videos that indicate that it is an above-the-line deduction, meaning that it will indeed reduce AGI. And, because of the way the IRS Social Security worksheet is structure, it consequently will reduce the Provisional Income used to compute taxable SS, just like the IRA deduction, another above the line deduction, does.
Jeff Enders says
@Gindle – would you mind posting links of those sites / videos?
This is clearly a ‘deduction’ and deductions occur AFTER AGI is calculated.
if you were to go to the law subsection related to the Senior Deduction, it states:
(a)Allowance of deductions
In the case of an individual, the exemptions provided by this section shall be allowed as deductions in computing taxable income.
note that the law states that the exemptions (which the Senior deduction is codified as an exemption) is a deduction in computing TAXABLE INCOME. it does not state it is a deduction in computing ADJUSTED GROSS INCOME.
Hence, it is deducted AFTER AGI is determined, and has no impact on AGI.
Harry Sit says
Those multiple sites/videos are wrong. Now you know which ones you shouldn’t trust if they still haven’t made a correction by now.
It’s available to both itemizers and non-itemizers but it’s not above-the-line. It doesn’t reduce AGI. Nor does it affect the Social Security worksheet.
The old dichotomy between above-the-line and must-itemize no longer holds. This third category isn’t above-the-line but you don’t have to itemize either. It’s in addition to both standard deduction and itemized deductions but it doesn’t affect AGI. Congress has created a number of these lately.
Nancy & Gary Memmel says
The phase out is a function OF AGI, so AGI would have to be determined prior to computing the deduction.
The House published a summary of the bill and listed a number of deductions (like the charity-for-non-itemizers at $150 pp; no senior temporary deduction appears anywhere ) as “above -the-line” deductions. Based on the summary, I thought what you did,too.
Then the Senate had it’s say, and the House subsequently signed off on that ( with charity-for-non-itemizers at $1000 pp, and the temporary senior deduction, which phases out based on AGI income),so maybe the changes occurring over the time required to finalize the bill the source of the confusion.
Mark E says
Getting back to the claim of “90% of Social Security beneficiaries will no longer pay federal income taxes on their benefits”, just how would they even know the amount of tax attributed to their social security benefits without simply removing the entire social security income from the tax form? Consider the sliding scale of the “Taxable SS Amount” that increases from factoring in other income such as IRA distributions. Would the tax to attributed to the calculated “Taxable SS Amount” be forgiven, which would greatly benefit taxpayers the more of other income they report (such as IRA distributions and capital gains)? And how would they even attribute the Standard Deduction (for example) when there is more income apart from SS that it could be applied to first? So many questions to answer from a ridiculous claim.
Harry Sit says
Mark – The 90% claim comes from applying 100% of the standard deduction first against the Social Security taxable income. When the taxable portion of SS is less than the standard deduction plus the new senior deduction, it’s claimed that this person/couple pays no tax on Social Security.
While there’s an argument to apply the new senior deduction against Social Security, there’s no reason that the standard deduction must be applied against Social Security first. It should go against non-SS income first or at least be prorated between SS and non-SS income in the AGI. Because people not on SS also receive the senior deduction, I wouldn’t apply 100% of the senior deduction to SS either.
douglas rasch says
Harry :With respect to a joint return with both 65, there shall be allowed a deduction for each qualified individual “with respect to the taxpayer”. A qualified individual is defined as the taxpayer age 65,and, in the case of a joint return, the taxpayer’s spouse (if age 65). The amount is reduced by 6% of so much of the taxpayer’s MAGI exceeds $150,000 in the case of a joint return. There is only one” taxpayer” with a joint return. So it seems to me the $12,000 phases out over $200,000 or at $350,000.
Jeff Enders says
@douglas – look at the language again.
The actual language in the law is “IN GENERAL.—In the case of any taxpayer for any taxable year, the $6,000 amount in clause (i) shall be reduced (but not below zero) by 6 percent…”
It states ANY taxpayer (not “taxpayer’s MAGI”). So that ANY means EACH qualified individual on the tax return is subject to the 6% reduction. So in both the case of a SINGLE filing or a Joint filing, the phaseout occurs over $100,000 of AGI from the starting point of the phase-out. For Joint filers, the phase-out for ANY individual occurs concurrently, not sequentially.
just my two cents
Harry Sit says
I originally thought so too, but it’s not “the amount” that is reduced by 6% of the excess income. It’s “the $6,000 amount” and each qualified individual has a $6,000 amount.
Jeff Enders says
Douglas- you are almost there. If you read the actual langage in the bill EACH Qualified Indiviudal is a taxpayer, so for the purposes of section 70103, a joint return where both individuals are at least 65 would mean TWO taxpapers.
And then it states: (note the word “any”)
In the case of ANY taxpayer for any taxable year, the $6,000 amount in clause (i) shall be reduced (but not below zero) by 6 per cent of so much of the taxpayer’s modified adjusted gross income as exceeds $75,000 ($150,000 in the case of a joint return).
so for joint / at least 65, in effect, there is a marriage penalty as the deduction is reduced by 12% (6% times 2) beginning at $150,000 of AGI, which means the deduction is zero at $250,000 of AGI.
douglas rasch says
Jeff and Harry, looks like you are correct. But there is a certain symmetry (1) $75,000 individual threshold and $150,000 joint (double); (2) $6,000 individual deduction and $12,000 joint (double) ; and (3) $100,000 phase out individual and $200,000 joint (double).
K. Cooper says
I think the symmetry is that 6% of $1,000 is $60, and so $100,000 “uses up” the entire $6,000 deduction of each taxpayer. From $75K to $175K for a single filer, and from $150K to $250K for a joint return.
Harry Sit says
Congress loves to create marriage tax penalty. They think a couple doesn’t need the same total income to be as well off as two singles once they pass a certain income level. This new law has introduced marriage tax penalty in several new places.
Dave says
Thank you so much for sharing this. There is a lot of incorrect information out there regarding this new deduction. I appreciate the clarification.
Mark E says
A prior post was very enlightening. That prompted me to write this Opinion piece.
Immediately after the “One Big Beautiful Bill” was passed by Congress, the SSA (Social Security Agency) sent out an email and updated their website to state that “The bill ensures that nearly 90% of Social Security beneficiaries will no longer pay federal income taxes on their benefits.” To put this claim into perspective, let’s crunch some numbers using a couple filing jointly and claiming the standard deduction. This is based on the 2024 tax year which does not reflect the items in the newly passed bill.
Assuming the couple’s only income is from Social Security, they can collectively earn up to $146,000 without paying any tax. Using a more probable amount of Social Security, let’s assume they each receive $30,000 ($60,000 total). The couple can then report up to $20,000 of “other income” before paying any tax. This “other income” includes IRA or 401K distributions, Pensions, Capital Gains, Dividends, Interest and a few others.
Looking at this, who do you think the Social Security beneficiaries the SSA claims being benefitted are? Looking at the SSA’s language, that nearly 90% of Social Security beneficiaries will NO LONGER pay federal income taxes on their benefits, it seems to imply that those same 90% WERE paying taxes. If the SSA were a business they could likely be liable under the Deceptive Trade Practices Act, you think?
Tom P says
Mark, everyone agrees the letter from the SSA was way off the mark. It would have been a bit more reasonable (but still not true) to say “…beneficiaries will no longer EFFECTIVELY pay federal income taxes on their benefits.” The bottom line is the amount of SS subject to taxation is the same before and after passage of the bill, assuming all the earning numbers are the same since the percentage is based on MAGI. The difference after the bill is you will get a larger deduction if you are 65+, which apparently for 90% of filers is enough to effectively offset the tax they pay on SS benefits.
Eliminating SS tax on benefits could not be passed under reconciliation, so we got what we got… which isn’t much for us, but I’ll take anything I can get.
Don Goldberg says
“I’ll take anything I can get.”
This “BBB” guts health care and nutrition asistance for millions. It funds expansion of a huge secret police force which disregards constitutional protections.
And some well to do retirees are happy about a modest benefit, and ignore the main impacts of the “BBB.”
No wonder younger people hate the Boomers.
Anna says
Am I correct in thinking that the greatest benefit will be for people whose taxable income is between $48K and $52K, because it will keep them from moving from the 12% to the 22% tax bracket?
Mark says
Anna, I forgot to mention that the analysis I provided was for tax year 2024, before the new benefits. So, the new benefits, to keep below the 22% threshold, would be for taxpayers higher than those.
Harry Sit says
The greatest benefit goes to people who can use the full $6,000/$12,000 in the highest possible tax bracket.
A single person needs an AGI of at least $72,225 (standard deduction + bottom of 22% bracket + $6,000) but not over $75,000 to use 100% in the 22% bracket. A married couple both 65+ needs an AGI of at least $143,650 (same math) but not over $150,000. Having qualified dividends or long-term capital gains in the AGI makes it more complicated. I’ll need that spreadsheet from MDM.
It turns out the AGI range is quite narrow to use 100% of the senior deduction in the 22% bracket. Most people will see at least part of the deduction falling into the 12% bracket.
Harry Sit says
Sorry, I used the 2024 brackets previously. I updated the numbers to use 2025 brackets, which make the AGI range even narrower for seeing the benefits fully in the 22% bracket.
Mark E says
Anna, not sure where you got that from. My analysis showed a couple could earn over $140,000, if all they reported was SS, before paying ANY tax. I can also say that a couple could earn about $75,000 and report over $50,000 in other income (which causes SS to be taxed very much higher) and still stay below the 22% threshold, after taking the standard deduction.