President Trump campaigned with the promise to end taxes on Social Security. The One, Big, Beautiful Bill (OBBB) is Trump’s cornerstone piece of legislation aimed at making that promise a reality. While seemingly welcome news to the near 58 million beneficiaries aged 65 and older (according to the Social Security Administration [SSA]), the pledge isn’t exactly as it seems.
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Upon passage of the OBBB, the SSA hailed provisions that it says will benefit Social Security recipients. Here’s why the SSA loves the OBBB and what it really means for retired Americans.
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Why the SSA Loves it
According to the SSA, a significant number of beneficiaries depend on monthly Social Security checks for at least half of their income. Knowing this, the SSA is actively highlighting the relief now available to recipients.
“The bill ensures that nearly 90% of Social Security beneficiaries will no longer pay federal income taxes on their benefits, providing meaningful and immediate relief to seniors who have spent a lifetime contributing to our nation’s economy,” the SSA said in a press release.
Before passage, only 64% of retirees didn’t pay taxes on Social Security benefits, according to the White House. Putting more money into the wallets of retirees is a good thing, and the SSA is wise to promote the fact.
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Yes, If You’re at the Right Income Level
The OBBB was a massive piece of legislation, with a reported 900 pages, according to NPR. However, one thing is clear — the OBBB doesn’t eliminate taxes on Social Security benefits. Thanks to the Byrd Rule, it wasn’t able to do that, according to CBS News.
What the OBBB does provide is a new deduction for retirees of $6,000 per person, providing an indirect benefit for individuals on Social Security. The deduction is available to both people who take the standard deduction or itemize. If you’re married, both spouses can claim the deduction, but there is a phaseout.
“The deduction will phase out at a 6% rate when modified adjusted gross income exceeds $75,000 for single filers and $150,000 for joint filers. The deduction is fully phased out at $175,000 for single filers and $250,000 for joint filers,” per the Tax Foundation.
The deduction isn’t indefinite as it ends at the end of 2028. For middle-class retirees, this could be a beneficial, albeit temporary, way to reduce taxes.
No, If It Doesn’t Impact You
It’s easy to hear headlines that there’s no more taxes on Social Security and think it’s a good thing. Unfortunately, there’s more beneath the surface. Not all retirees will feel the impact of the new deduction for older Americans.
Lower-income retirees will see little to no change, according to the Tax Foundation, “Those taxpayers are already exempt from taxation on their Social Security benefits.”
No, If You’re Concerned About Social Security Lasting
Trust funds will deplete by 2034, a year sooner than anticipated, according to the SSA. Understandably, some retirees or near-retirees may feel nervous about possible insolvency. The OBBB may worsen the situation.
Bobby Kogan, senior director of federal budget policy at the Center for American Progress, said to CBS News that we’re already facing an issue with insufficient funds being contributed to the trust fund. And this bill would result in even less money being added to it.
The Committee for a Responsible Budget (CRFB) confirmed this concern. “OBBBA would impact Social Security and Medicare indirectly, mainly by reducing the revenue collected from the income taxation of Social Security benefits, which is deposited into the Social Security and Medicare trust funds,” said the CRFB.
This reality may make it necessary for politicians to do something many don’t want to see: slashing benefits. This is a key reason why anxious Americans view the changes with apprehension.
The OBBB provides some benefits to Americans on Social Security, but they’re largely temporary. While the SSA excitedly announced the changes, due diligence is essential to see if it’s good for you.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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This article originally appeared on GOBankingRates.com: Why the Social Security Administration Loves Trump’s ‘Big Beautiful Bill’ — Should You?
