And just last week, the Senate released its proposal for a senior “bonus” to further assist middle-income taxpayers. This new program aims to help people who make under $75,000. It includes already married couples with a total household income over $150,000. This modest but impactful temporary deduction has the power to significantly decrease the tax burden among many seniors. The bill’s provisions will apply for tax years 2025 to 2028.
The proposed senior bonus aims to deliver maximum deduction amounts for eligible seniors. If your modified adjusted gross income is $75,000 or less, you will receive the full benefit. Married couples filing jointly are eligible if their income is under $150,000. These tax provisions disproportionately benefit middle income taxpayers, who will tend to benefit most from this proposal.
Howard Gleckman, a senior fellow at the Urban-Brookings Tax Policy Center, described the importance of this effort. He advanced the idea that millions of seniors are being overtaxed on their Social Security benefits especially as their overall income level increases. For married filing jointly with a combined income over $44,000, up to 85% of their Americans’ Social Security income is taxed. The same taxation happens to individual filers making over $34,000 or joint filers making over $44,000. People making just $25,000 to $34,000 can lose up to half their benefits with an effective tax rate of 50%. Couples with a combined income as high as $44,000 will be hit by this marriage tax.
Gleckman was careful to point out that the intent of the bonus is to help the people who need help, not just everyone. “It’s better because it helps the people who need the help more,” he stated. The proposal addresses the economic strife that middle-income seniors face. These seniors are acutely aware of the tug of competing resources.
The reconciliation process through which this harmful tax bill is advancing presents some challenges. Traditionally, reconciliation has been off limits to Social Security changes. Supporters say this senior deduction doesn’t change the overall shape of the program. During discussions around the proposal, Durante remarked, “I think it’s pretty clear, since this was in both bills, that there’s going to be a version of a senior deduction.”
What’s being proposed in the bonus seems to be a good start, particularly for middle-income seniors. Its success will largely be determined by the larger legislative picture and our capacity to move past reconciliation-related roadblocks. Gleckman further noted that the impact of the bonus could vary based on where taxpayers align on the income distribution spectrum. “It really depends on where you are on the income distribution,” he explained.