Former President Donald Trump is bringing a new bill to the floor. He refers to it as the “one big beautiful bill” and it’s intended to deliver up to $350 million in targeted financial relief to seniors 65 and older. The proposed bill would provide a meaningful extra $6,000 deduction specifically for this group. This adjustment would make a huge difference, lowering the taxation of Social Security benefits by about $30 billion per year. The initiative has been hailed by the Social Security Administration as “long-awaited tax relief to millions of older Americans.”
The new bill will be in effect for tax years 2025 through 2028. This would be a major relief, but it still wouldn’t fully remove taxes on Social Security benefits. Instead, it calls for a tax cut starting with those earning less than a given amount. Individual taxpayers with modified adjusted gross income up to $75,000 ($150,000 for joint filers) can deduct the full amount. So, married couples filing jointly with incomes up to $150,000 are eligible to receive the same benefit.
As happy as some might be over the prospect of Trump’s proposal coming true, experts have cautioned not to expect a windfall. The bill doesn’t promise that seniors will get a $6,000 “surprise” check in the mail. Nor do they tend to receive tax refunds during tax season. Howard Gleckman, a senior fellow at the Urban Institute, cautioned, “It’s simply not correct to say that there’s a provision in this bill that is going to eliminate the Social Security benefit tax for 90% of the population.”
As designed, the bill projects a tax cut. This increase is due primarily to the additional deduction and other TBD provisions. Higher-income singles, as well as married couples above the income thresholds, would automatically be excluded from the proposed tax relief. It’s important to note this dynamic. Taxation of Social Security benefits depends on your combined income. That total income is your adjusted gross income, plus any nontaxable interest, plus half of your Social Security benefits.
According to the Social Security Administration, it will improve the lives of almost 90% of older Americans. They will be better off due to some form of tax relief as a result. One important caveat to note is that this does not erase all taxes on Social Security benefits. Getting our heads around this distinction is partly shapeshifting, it’s fundamentally important. Gleckman elaborated that “the people who benefit the most, we estimate, are people who made between $50,000 and $200,000.”
Additionally, it is worth noting that tax liabilities are only reduced, perhaps even eliminated for some seniors, depending on individual circumstances. Alex Durante, a senior policy analyst at the Tax Foundation, noted that “the enhanced deductions overall are going to reduce tax liabilities for seniors significantly, and for some people, it will probably wipe out any tax liability they have.” He emphasized that “it depends on where they are in the income distributions.”
The nuances of Trump’s bill illustrate a complex interplay between providing targeted support for seniors and addressing broader fiscal concerns. Opponents of the measure quickly questioned how the plan might affect Social Security’s long-term solvency. Gleckman pointed out, “It’s just wrong to say that this is going to preserve the solvency of Social Security.”