Trump's One Big, Beautiful Bill to Eliminate Taxes on Social Security Benefits for 90% of Recipients

The Social Security Administration (SSA) said in a press release last week that the US President Donald Trump's One Big, Beautiful Bill, which was passed as law recently, would offer millions of US seniors significant tax relief on their Social Security benefits.

While experts believe the bill could increase the national debt by trillions of dollars over the next decade, the SSA stated the new rules would ensure that almost 90% of the 70+ million Social Security recipients won't have to pay federal income taxes on their benefits, offering immediate relief to seniors.

The SSA's estimates are similar to a June analysis by the White House's Council of Economic Advisers that forecast 88% of seniors, or over 51.4 million people on Social Security, will pay no tax on their payments under the law since their deductions would exceed their taxable benefits.

The bill 'includes the largest tax break in American history for our nation's seniors,' the council had stated, adding that 'the deductions ensure that seniors who earned their Social Security through years of hard work get more money back in their pockets.'

The bill includes a provision that eliminates federal income taxes on Social Security benefits for most beneficiaries through enhanced deduction for taxpayers aged 65 and older.

'This is a historic step forward for America's seniors,' Social Security Commissioner Frank Bisignano stated in the press release. 'For nearly 90 years, Social Security has been a cornerstone of economic security for older Americans. By significantly reducing the tax burden on benefits, this legislation reaffirms President Trump's promise to protect Social Security and helps ensure that seniors can better enjoy the retirement they've earned.'

However, policy experts believe that the new law does not completely do away with taxes on Social Security benefits but offers relief by creating a new 'bonus' tax deduction for beneficiaries.

'While the deduction does provide some relief for seniors, it's far from completely repealing the tax on their benefits,' Garrett Watson of the Tax Foundation had reportedly said.

In simple terms, the bill doesn't eliminate taxes on Social Security but introduces a temporary deduction for beneficiaries to lower their federal income tax liability.

The temporary tax deduction is up to £4,419 ($6,000) for seniors aged 65 and older and is available to individuals with adjusted gross incomes of £55,244 ($75,000) or less and £110,488 ($150,000) or less for couples filing taxes jointly. Notably, the tax deduction is set to expire at the end of 2028.

'Each spouse can take the deduction, for a total of £8,839 ($12,000), if both are 65-plus,' AARP noted in its analysis of the bill. However, the new tax deduction is not available to recipients under 65 and people with incomes above the specified thresholds. Note that the tax cut is completely phased out for individuals earning £128,903 ($175,000) and for couples making £184,147 ($250,000) annually.

The new law also won't benefit low-income seniors who already pay no federal income tax because they earn too little. According to Martha Shedden, president of the National Association of Registered Social Security Analysts, the biggest beneficiaries of the bill will be higher-income seniors.