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CNBC
07-07-2025
- Business
- CNBC
'Big beautiful bill' may help some seniors on Social Security. But it doesn't eliminate taxes on benefits
The Social Security Administration sent what experts say is a misleading email to consumers last week, describing President Donald Trump's "one big beautiful bill" as "long-awaited tax relief to millions of older Americans." In that email and a July 3 press release, the agency said the legislation will make it so "nearly 90%" of Social Security beneficiaries no longer pay federal income taxes on benefits. It attributed that to an additional $6,000 senior deduction and another unspecified provision. Tax experts say that is not accurate. The legislation does not include a provision that eliminates taxes on Social Security benefits for most beneficiaries. Moreover, while the Social Security Administration memo said the law helps protect Social Security, experts say the provisions weaken the program's funding by reducing the tax money it receives. "It's simply not correct to say that there's a provision in this bill that is going to eliminate the Social Security benefit tax for 90% of the population," said Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center. "And it's also just wrong to say that this is going to preserve the solvency of Social Security," Gleckman said. More from Personal Finance:What Trump's 'one big beautiful' tax-and-spending package means for your moneyTax changes under Trump's 'big beautiful bill' — in one chart78% say Trump's tariffs will make it harder to deal with debt, survey finds Trump had said on the campaign trail that he planned to eliminate federal income taxes on Social Security benefits. However, the reconciliation process through which the budget and tax legislation was passed prohibits changes to Social Security. The Social Security Administration did not return requests for comment. The White House deferred comment to the Social Security Administration. The Council of Economic Advisers, an agency within the presidential executive office, estimates that changes in the legislation will help push the portion of seniors with exemptions and deductions exceeding Social Security income to 88%, from 64% under current law. Those tax changes include a higher standard deduction, the existing senior deduction already in effect and the new additional senior deduction or "bonus." The new tax package includes an additional deduction of up to $6,000 for seniors ages 65 and over. While the additional senior deduction has been called a "bonus" in the legislative text, it is technically a deduction, which reduces the amount of income that is subject to taxes. Notably, that does not necessarily mean seniors will see a $6,000 "bonus" check in the mail or in their refunds at tax time. "This is not like what happened during Covid, when the government was writing checks to people," Gleckman said. Per the legislation, the deduction will be in place for tax years 2025 through 2028. It will be available to eligible taxpayers regardless of whether they take the standard deduction or itemize their returns. But eligibility depends on income. Taxpayers with up to $75,000 in modified adjusted gross income — or up to $150,000 if married and filing jointly — may receive the full deduction. For incomes above those thresholds, the deduction gradually phases out. Middle-income seniors stand to benefit the most from the change, according to tax experts. Social Security benefits are taxed based on combined income, or the sum of adjusted gross income, nontaxable interest and half of Social Security benefits. Individuals with between $25,000 and $34,000 in combined income may have up to 50% of their Social Security benefits taxed. If their combined income is more than $34,000, up to 85% of their benefits may be taxed. For married couples with combined income between $32,000 to $44,000, up to 50% of their benefits may be taxed. If they have over $44,000, up to 85% of their benefits may be taxed. Those thresholds are not adjusted for inflation, which means that over time more beneficiaries pay taxes on their benefits. Because the new senior bonus is an above-the-line deduction, meaning it is subtracted from gross income to calculate adjusted gross income, it may indirectly reduce tax liability on Social Security benefits. The additional senior deduction will not affect taxes on Social Security benefits for individuals and couples below those income thresholds, since they already are not subject to levies on their benefits, Gleckman said. Nor will it help people who earn too much to qualify for the new deduction. Higher-income individuals and married couples with more than $75,000 or $150,000 in modified adjusted gross income, respectively, may not see their Social Security benefit taxes reduced, unless they are in the phaseout window. For taxpayers who qualify, the senior deduction may reduce, rather than eliminate, their taxes on benefits, Gleckman said. The Urban-Brookings Tax Policy Center estimates that fewer than half of older adults will benefit from the senior deduction, he said. Even those who benefit won't necessarily see zero taxes; they'll just see fewer taxes, Gleckman said. "The people who benefit the most, we estimate, are people who made between $50,000 and $200,000," Gleckman said. The legislation may be more generous to seniors than to taxpayers in other age cohorts, said Alex Durante, senior economist at the Tax Foundation. "The enhanced adoptions overall are going to reduce tax liabilities for seniors significantly, and for some people, it will probably wipe out any tax liability they have," Durante said. "But it depends on where they are in the income distributions," he said. While certain seniors may see financial benefits now, the enhanced senior deduction will cost the Social Security program, which is already under financial strain. The new additional senior deduction and other changes in Trump's "big beautiful bill" may reduce taxation of Social Security benefits by approximately $30 billion per year, estimates the Committee for a Responsible Federal Budget. That would accelerate the projected insolvency date for the Social Security trust fund devoted to retirement benefits to late 2032, up from the currently projected date of early 2033, according to CRFB. To help shore up the program's funds, Congress faces a choice of raising taxes, cutting benefits or a combination of both. The sooner any changes are enacted, the more time there is for them to be phased in, according to experts. "Every year we delay reforming the program means those changes will have to be steeper and affect more people closer to retirement age," CRFP President Maya MacGuineas wrote in a recent op-ed.
Boston Globe
06-07-2025
- Business
- Boston Globe
Social security email says policy bill eliminates tax on benefits. Does it?
The email, which went out Thursday, said the new law 'includes a provision that eliminates federal income taxes on Social Security benefits for most beneficiaries,' and, 'additionally, it provides an enhanced deduction for taxpayers aged 65 and older.' Advertisement But the enhanced deduction will help reduce households' tax bills on their overall income, including Social Security income. 'The SSA statement implies there is a direct tax cut on Social Security benefits,' said Howard Gleckman, a senior fellow at the Tax Policy Center, a nonpartisan think tank, 'which there is not.' Get Starting Point A guide through the most important stories of the morning, delivered Monday through Friday. Enter Email Sign Up Instead, older single filers will get the extra $6,000 deduction ($12,000 for couples), as long as their income falls under a certain ceiling (below $75,000 for single filers or $150,000 for married joint filers). Above those income levels, the deduction begins to decrease, and it goes away once single taxpayers' income reaches $175,000 ($250,000 for couples). Nor will the extra deduction benefit all Social Security recipients. Retirees who are 62 through 64 are ineligible. And since the income of more than half of Social Security recipients is too low to be taxed anyway, lower income people won't be helped much. The new break is expected to benefit middle- and upper-middle-class households, tax policy experts said. (Recipients who earn less than $63,300 owe an average of 1% of their Social Security benefits in taxes, according to an analysis from the Center on Budget and Policy Priorities.) Advertisement The Tax Policy Center estimates that less than half of older adults, most of whom earn about $50,000 to $200,000, will get some benefit from the new deduction, though most of them will still owe some tax, Gleckman added. Under current law, an estimated 64% of beneficiaries did not owe taxes on their Social Security benefit, and the new deduction would boost that number to 88%, according to an analysis in June from the White House Council of Economic Advisers. This article originally appeared in
CNBC
18-06-2025
- Business
- CNBC
Senate version of 'big beautiful' bill calls for $6,000 senior 'bonus'
The Senate version of the One Big Beautiful Bill Act includes a temporary enhanced deduction for seniors ages 65 and up. The House of Representatives also proposed such a tax break in its text, calling it a "bonus." Notably, the Senate is calling for a deduction of up to $6,000 per qualifying individual. The House included a $4,000 deduction. The senior "bonus" is in lieu of the elimination of taxes on Social Security benefits that President Donald Trump pitched on the campaign trail. The Republicans' tax bill is being done through reconciliation, a process that generally prohibits changes to Social Security. The White House has said the proposed deduction is a "historic tax break" for seniors. The full deduction amount would be available to individuals with up to $75,000 in modified adjusted gross income, and $150,000 if married and filing jointly. More from Personal Finance:'SALT' deduction in limbo as Senate Republicans unveil tax planHow Senate GOP 'no tax on tips' proposal differs from House plan Senate tax bill includes $1,000 baby bonus in 'Trump accounts' Notably, the Senate version calls for a faster 6% phase-out rate for incomes above those thresholds, compared to the House version's 4% phase-out rate, according to Alex Durante, senior economist at the Tax Foundation. The faster phase-out means the full $6,000 benefit is lost more quickly, said Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center. For people who would be eligible for the full proposed senior deduction, the Senate's $6,000 version is more generous, he said. "It really depends on where you are on the income distribution," Gleckman said, with middle-income taxpayers poised to benefit most. In the House version, the proposed senior deduction would be available to taxpayers whether they take the standard deduction or itemize their tax returns. There are not many taxpayers in the income ranges for the deduction who itemize their returns, Gleckman said. To qualify for the break, all individual taxpayers and spouses, if filing jointly, would need to have Social Security numbers. The temporary senior deduction would be in place for tax years 2025 through 2028. The House of Representatives passed its version of the One Big Beautiful Bill Act on May 22. Both chambers will have to agree on the changes before it is sent to Trump's to sign. "I think it's pretty clear, since this was in both bills, that there's going to be a version of a senior deduction," Durante said. Eliminating taxes on Social Security benefits would have been a more expensive provision, he said. Tax-free Social Security benefits would have benefited higher-income people most, according to Gleckman. Currently, Social Security benefits are taxed based on a formula known as combined income — the sum of adjusted gross income, nontaxable interest and half of Social Security benefits. Up to 85% of Social Security benefits are taxed for single taxpayers with combined income above $34,000 and joint filers with more than $44,000. Meanwhile, up to 50% of benefits are taxed for individuals with $25,000 to $34,000 in combined income and for couples with between $32,000 and $44,000. In contrast, the proposed senior "bonus" would not benefit high-income taxpayers and instead focuses on middle-income taxpayers with incomes less than $75,000 if single or $150,000 if married. "It's better because it helps the people who need the help more," Gleckman said.
Business Mayor
16-05-2025
- Business
- Business Mayor
How House GOP bill's $4,000 senior 'bonus' compares to eliminating tax on Social Security benefits
The U.S. Capitol is seen on Capitol Hill in Washington, D.C., U.S., May 7, 2025. Nathan Howard | Reuters House Republicans' 'one, big, beautiful' tax bill includes a new temporary $4,000 deduction for older adults. The change, called a 'bonus' in the legislation, is aimed at helping retirees keep more money in their pockets and provides an alternative to the idea of eliminating taxes on Social Security benefits, which President Donald Trump and other lawmakers have touted. The bill provides a 'historic tax break' to seniors receiving Social Security, 'fulfilling President Trump's campaign promise to deliver much-needed tax relief to our seniors,' White House Assistant Press Secretary Elizabeth Huston said via email. The proposal calls for an additional $4,000 deduction to be available to adults ages 65 and over, whether they take the standard deduction or itemize their returns. The temporary provision would apply to tax years 2025 through 2028. The deduction would start to phase out for single filers with more than $75,000 in modified adjusted gross income, and for married couples who file jointly with more than $150,000. More from Personal Finance: House Republican bill calls for bigger child tax credit Medicaid work requirements kick hardworking people off health coverage: Senator House Republicans advance Trump's tax bill — but 'SALT' deduction still undecided As a tax deduction, it would reduce the amount of seniors' income that is subject to levies and therefore reduce the taxes they may owe. Notably, it is not as generous as a tax credit, which reduces income tax liability dollar for dollar. Read More The Fed Has Been Raising Rates, But What's Next? A median income retiree who brings in up to about $50,000 annually may see their taxes cut by a little less than $500 per year with this change, noted Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center. 'It's not nothing, but it's also not life changing,' Gleckman said. New deduction vs. eliminating taxes on benefits The $4,000 senior 'bonus' deduction would help lower-income people and would not help higher-income individuals who are above the phase outs, Gleckman said. In contrast, the proposal to eliminate taxes on Social Security benefits would have been a 'big windfall' for high-income taxpayers, he said. 'If you feel like you need to provide an extra benefit to retirees, this is clearly a better way to do it than the original Social Security proposal that Trump had,' Gleckman said. Social Security benefits are taxed based on a unique tax rate applied to combined income — or the sum of adjusted gross income, nontaxable interest and half of Social Security benefits. Beneficiaries may have up to 85% of their benefits subject to taxes if they have more than $34,000 in combined income individually, or more than $44,000 if they are married and file jointly. Up to 50% of their benefits may be taxed if their combined income is between $25,000 and $34,000 for individual taxpayers, or between $32,000 and $44,000 for married couples. Beneficiaries with combined income below those thresholds may pay no tax on benefits. Therefore, a policy to eliminate taxes on benefits would not help them financially. The proposed $4,000 tax deduction for seniors may help some retirees who are on the hook to pay taxes on their Social Security benefit income offset those levies, according to Garrett Watson, director of policy analysis at the Tax Foundation. However, the impact of that change would vary by individual situation, he said. For some individuals who pay up to an 85% tax rate on their benefit income, 'that $4,000 deduction can make a difference,' Watson said. 'Bonus' would be less costly to implement The Senate is prohibited from including changes to Social Security, including the proposal to eliminate taxes on benefits, in reconciliation bills like the tax package now up for consideration. Notably, the proposed $4,000 deduction for seniors would be less expensive. If that change were made permanent, it would cost around $200 billion over 10 years, Watson said. In contrast, eliminating taxes on Social Security benefits would cost more than $1 trillion over a decade, he said. 'It's actually probably less than 20% of the size of the tax cut that was initially pitched during the campaign,' Watson said. Moreover, the cost for the $4,000 deduction would come out of general revenue for income tax, which means it would not directly take money from Social Security's trust funds, which already face a funding shortfall.
