Just last week, the One Big Beautiful Bill Act (OBBBA) was signed into law by President Trump. It encompasses a wide array of provisions impacting areas such as tax regulations, energy, immigration, healthcare, and defense. Today, I wanted to focus on how this new law will affect the taxation of our social security benefits.
First off, the taxation of Social Security benefits did not change with this law. However, some of the provisions of the law were put in there to specifically help offset those taxes. The OBBBA will introduce a temporary tax deduction aimed at reducing the tax burden for taxpayers over the age of 65 that have income that falls below certain thresholds.
Here’s a summary of the key changes:
New Tax Deduction for Seniors: The bill enacts a temporary $6,000 tax deduction for individuals aged 65 or older. For married couples, this deduction can be up to $12,000 if both are 65 or older. This deduction applies whether you itemize your deductions or take the standard deduction.
Income Thresholds for Deduction: This deduction is available to individuals with incomes up to $75,000 and married couples with incomes up to $150,000. Above these thresholds, the deduction phases out, disappearing entirely for individual incomes over $175,000 and couple incomes over $250,000.
Temporary Provision: It’s important to note that this new tax deduction is temporary and is set to expire after 2028 unless extended by future legislation.
Effective Date: The tax break will take effect for the 2025 tax year, meaning eligible individuals will see changes when filing their taxes in early 2026.
To summarize, the bill provides tax relief to many seniors through a targeted deduction rather than a complete repeal of Social Security benefit taxation.
Please comment or send an email if you have any questions.
Joe Baker, CFP®
Baker Asset Management, LLC
joebaker@bakerassemanagement.com
