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New Tax Bill Offers Partial Relief, Not a Full Tax Break on Social Security

The Social Security Administration recently promoted what it described as a “long-awaited tax relief” package for seniors, praising President Donald Trump’s proposed “big beautiful bill.” The message claimed nearly 90% of Social Security recipients would no longer pay federal taxes on their benefits.

But tax experts say that’s simply not true.

While the legislation introduces a $6,000 “senior bonus” deduction for Americans age 65 and over, it does not eliminate taxes on Social Security benefits for most retirees. Nor does it contain provisions that protect the solvency of Social Security—in fact, it may do the opposite.

What the Bill Actually Includes

At the heart of the legislation is a $6,000 additional tax deduction for older Americans. It will apply from 2025 through 2028, regardless of whether a taxpayer itemizes deductions or takes the standard deduction.

Eligibility Requirements:

• Individuals with modified adjusted gross income (MAGI) under $75,000
• Married couples filing jointly with MAGI under $150,000
• Deduction phases out above those income thresholds

This deduction is aimed primarily at middle-income seniors, especially those earning $50,000 to $200,000 annually, who may see modest relief on the taxes applied to their Social Security benefits.

Why Social Security Taxes Are Still in Place

Social Security benefits are taxed based on combined income:

• For individuals:
  • $25,000–$34,000 → up to 50% of benefits taxable
  • Over $34,000 → up to 85% taxable
• For married couples:
  • $32,000–$44,000 → up to 50%
  • Over $44,000 → up to 85%

These income thresholds are not adjusted for inflation, meaning more seniors become taxable over time. Although the new deduction can slightly reduce adjusted gross income (AGI) and potentially lower the portion of benefits taxed, it won’t eliminate taxes entirely for most recipients.

“This is not like the stimulus checks during COVID,” said Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center. “It’s a deduction—not a direct payment or refund.”

Gleckman also stressed that the SSA’s language was misleading, noting that the bill does not eliminate benefit taxes for 90% of seniors and doesn’t strengthen Social Security’s finances.

Who Gains from the Deduction?

The biggest beneficiaries of the $6,000 senior deduction are:

• Seniors with moderate income who fall just inside eligibility thresholds
• Those whose deduction brings AGI below key taxation thresholds for Social Security

High-income retirees earning over the phase-out thresholds won’t qualify for the deduction. Meanwhile, lower-income seniors, who already don’t pay tax on Social Security, won’t see any new savings.

Even for those who qualify, the impact is limited: “They’ll pay less tax, not zero tax,” Gleckman emphasized.

Still, Alex Durante of the Tax Foundation pointed out that the legislation is “more generous to seniors than to other age groups.” For some, it could completely wipe out federal tax liability.

What It Means for Social Security’s Future

While the new deduction may be politically popular, it comes at a steep cost to the Social Security system.

According to the Committee for a Responsible Federal Budget (CRFB), the legislation would reduce federal taxation of Social Security benefits by $30 billion per year. That lost revenue would speed up the depletion of the Social Security retirement trust fund.

Projected insolvency date:

• Before the bill: Early 2033
• After the bill: Late 2032

To preserve the program, Congress would eventually need to:

• Raise payroll taxes
• Reduce benefits
• Or enact a mix of both

“The longer we delay fixing the system, the more dramatic the eventual reforms will need to be,” said Maya MacGuineas, president of CRFB.

Final Takeaway

The “big beautiful bill” adds helpful tax relief for some seniors—but it falls short of the sweeping claims made by the Social Security Administration. It doesn’t eliminate benefit taxes for most retirees and may, in fact, weaken the very program it aims to support.

As lawmakers debate the next steps for retirement policy, the trade-off between short-term relief and long-term solvency will only grow more urgent.