I obtained an e-mail from Social Safety Administration on July 3, applauding the brand new 2025 Trump tax regulation — One Massive Lovely Invoice Act. The e-mail mentioned,
The brand new regulation features a provision that eliminates federal revenue taxes on Social Safety advantages for many beneficiaries, offering aid to people and {couples}.
I learn the One Massive Lovely Invoice Act. This half is just not true. The brand new 2025 Trump tax regulation doesn’t remove federal revenue tax on Social Safety advantages. Social Safety remains to be taxable simply as earlier than.
Momentary Senior Deduction
The e-mail from Social Safety Administration continued to say:
Moreover, it offers an enhanced deduction for taxpayers aged 65 and older, guaranteeing that retirees can maintain extra of what they’ve earned.
This half is true, however the e-mail failed to say that the improved deduction is solely short-termand it has nothing to do with Social Safety anyway.
One Massive Lovely Invoice Act created a brand new $6,000 senior deductionaccessible solely from 2025 by means of 2028to seniors 65 and older throughout these years. It doesn’t matter whether or not you’re receiving Social Safety or not. It doesn’t matter whether or not you’re even eligible for Social Safety or not.
Unrelated to Social Safety
Should you’re 62 and receiving Social Safety, you don’t qualify for this new senior deduction since you’re not 65 but. Your Social Safety is taxable simply as earlier than.
Should you and your neighbor are each 65, and also you’re receiving Social Safety however your neighbor isn’t eligible for Social Safety as a result of they didn’t pay into it, each of you qualify for this new senior deduction. Should you and your neighbor have the identical revenue exterior Social Safety (pension, curiosity, dividends, capital positive aspects, and many others.), you’ll pay larger taxes than your neighbor once you add your taxable Social Safety advantages on prime.
Should you’re 65 this 12 months and also you’re delaying your Social Safety, you continue to qualify for this new senior deduction. If you declare your Social Safety subsequent 12 months at 66, your taxes will enhance as a result of Social Safety is taxable simply as earlier than the 2025 Trump tax regulation.
No Change to AGI
The brand new short-term senior deduction goes after the usual deduction or itemized deductions. It’s not a part of the usual deduction. It’s nonetheless accessible in case you itemize deductions. Nonetheless, it doesn’t decrease your AGI. It doesn’t make it simpler so that you can qualify for issues keyed off of the AGI, for instance, avoiding larger Medicare premiums below IRMAA. It doesn’t decrease state taxes.
No Change to Tax on Social Safety
The brand new senior deduction is simply an additional tax profit for seniors. It has nothing to do with Social Safety. It doesn’t take away taxes on Social Safety. The brand new additional tax profit could also be value kind of than the tax in your Social Safety advantages. You have got the brand new tax profit on one aspect and the tax on Social Safety on the opposite aspect. The 2 are utterly unrelated.
It’s like some folks saying they picked up $5 on the road and subsequently their espresso is free. The 2 issues don’t have anything to do with one another. You don’t have to purchase espresso after choosing up $5. The espresso nonetheless prices the identical whether or not you picked up $5 or not. The espresso could also be kind of than $5. It isn’t free.
Please use my calculator How A lot of Your Social Safety Advantages Is Taxable? to learn how a lot of your Social Safety advantages is taxable. The brand new 2025 Trump tax regulation didn’t change any of that calculation.
Revenue Phaseout
Not solely is the brand new senior deduction short-term, but it surely additionally phases out as your revenue goes up. You get the complete $6,000 deduction in case you’re single and your modified adjusted gross revenue is $75,000 or much less ($150,000 or much less for married submitting collectively; you get $0 deduction in case you’re married submitting individually).
The modified adjusted gross revenue is the AGI for most individuals. You don’t have so as to add again untaxed Social Safety or muni bond curiosity. The “modified” half is just for overseas earned revenue exclusion and residents in Puerto Rico, Guam, American Samoa, and the Northern Mariana Islands.
As your revenue goes up, the deduction is lowered by 6% of any further revenue above the $75,000/$150,000 threshold. The deduction disappears when your revenue is $175,000 or extra in case you’re single or $250,000 or extra in case you’re married submitting collectively.
The tables under illustrate how the deduction phases out at completely different revenue ranges. Extrapolate when your revenue is between the numbers proven within the tables.
Single
| Revenue | Senior Deduction |
|---|---|
| $75,000 or much less | $6,000 |
| $85,000 | $5,400 |
| $95,000 | $4,800 |
| $105,000 | $4,200 |
| $115,000 | $3,600 |
| $125,000 | $3,000 |
| $135,000 | $2,400 |
| $145,000 | $1,800 |
| $155,000 | $1,200 |
| $165,000 | $600 |
| $175,000 or above | $0 |
Married Submitting Collectively
| Revenue | One Individual Is 65+ | Each Are 65+ |
|---|---|---|
| $150,000 or much less | $6,000 | $12,000 |
| $160,000 | $5,400 | $10,800 |
| $170,000 | $4,800 | $9,600 |
| $180,000 | $4,200 | $8,400 |
| $190,000 | $3,600 | $7,200 |
| $200,000 | $3,000 | $6,000 |
| $210,000 | $2,400 | $4,800 |
| $220,000 | $1,800 | $3,600 |
| $230,000 | $1,200 | $2,400 |
| $240,000 | $600 | $1,200 |
| $250,000 or above | $0 | $0 |
(Picture Credit score: Google Gemini)
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