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President Donald Trump made eliminating taxes on Social Security a centerpiece of his campaign in 2024, and his administration is now claiming it has fulfilled that promise.
However, the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, does not outright eliminate federal income taxes on Social Security benefits. What it does is provide a temporary $6,000 additional standard deduction for seniors age 65 and older ($12,000 for married couples), effective from 2025 to 2028.
Here’s what finance experts think retirees should know.
Many retirees already don’t pay taxes on Social Security
according to a economic advisory council According to the analysis, 88% of all seniors receiving Social Security income will not pay federal taxes on benefits under the new law. However, many retirees may not see much of a change in policy because they weren’t paying taxes on their benefits in the first place.
“Those who only receive Social Security checks and have no other source of income will not receive any concrete benefits, given that they do not currently pay taxes on this income,” said CEO Alonso Rodríguez Segarra. give financial advice.
High-income retirees may benefit most
For higher-income retirees, the proposal could have a more meaningful impact. That’s because currently, the IRS taxes Social Security benefits at up to 85% if income exceeds certain limits.
Segarra says Trump’s proposal is largely targeted at this group — “retirees who, in addition to their Social Security checks, can withdraw funds from 401(k)s or traditional IRAs. While these withdrawals are recorded as taxable income, the benefit is that these individuals qualify for a specific deduction.”
Eliminating taxes on benefits could reduce “double taxation” on income that some people see as already being taxed during the working years.
Your other income still matters
Even with the increased deduction, there is a lot involved in how Social Security benefits are taxed. Andrew Lokenath, owner of The Finance NewsletterEmphasizes that what matters most is your combined income.
“Every dollar withdrawn from a 401(k) or IRA counts toward that joint income limit. A married couple withdrawing $40,000 from an IRA in addition to the $40,000 in Social Security may still have to pay taxes on this deduction,” Lokenath said. “In my years in banking I’ve seen people be wary of this, and this is something that can cost hundreds, sometimes over $1,000, if you’re not looking at it.”
Remember that the $6,000 deduction is not available to every senior. The additional deduction begins to phase out at $75,000 of modified adjusted gross income (MAGI) and disappears entirely at $175,000 for single filers. For married couples filing jointly, the phaseout starts at $150,000 and ends when income exceeds $250,000.