Trump’s Big Beautiful Bill establishes a lower taxation on Social Security
Though the Big Beautiful Bill did not eliminate taxes on Social Security, it has provided some relief from the potential taxation of 85% of those payments through 2028. Hopefully these 3-years of benefits can be codified and permanent after 2028.
Up to 85% of Social Security benefits can be taxed currently, and those were passed in 1993, when the maximum taxation was only 50% of benefits. Al Gore, vice president at the time under Bill Clinton, cast the tie-breaking vote in the Senate to push 85% taxation on Social Security across the goal line. And we all know how much the government loves taxation, like a drug addiction. Sure they will cut back, but will never eliminate a tax once it’s been pushed on us.
Here is an overview of the new Social Security tax structure:
It’s only a deduction
- It provides a temporary, enhanced standard deduction for retirees aged 65+
- Starting with the 2025 tax year, qualifying filers can deduct:
- Up to $6,000 (single, 65+ with AGI ≤ $75,000)
- Up to $12,000 (married, both 65+ with AGI ≤ $150,000)
Who qualifies?
- Must be 65 or older.
- AGI phase-out:
- Single: completely gone out once AGI > $175,000
- Couples: phases out fully at AGI > $250,000
- Expires after 2028 – it’s a four‑year cut
What it means in practice
- Previously, about 64% of retirees paid no tax on their benefits.
- This deduction helps 88% of seniors zero out any taxable Social Security income
- It’s called “no tax on Social Security,” but that’s shorthand since the benefit comes from the deduction
Policy Implications
- Budget impact: Estimated cost is around $90 billion over four years and it could grow to $250 billion if extended
- Trust fund effects: Because less revenue goes into Social Security taxes, the projected depletion could accelerate by about a year
- Equity issues: Critics argue the deduction mainly aids middle- and upper-income seniors, offering little to those who already owe no tax
Again, the government never lets go of a good tax. Does it help seniors in an economy that has seen significant inflation over the past several years? Absolutely. And does the new plan reward seniors for the contributions they’ve made for decades to a program that should never have been taxed? Yes. We will keep close tabs on how this program begins to reflect in actual implementation in the 2026 tax season.