No Taxes On Social Security Is A Promise Only Partially Kept

When it comes to tax news, but especially when it comes to tax law, it’s important to always read the fine print. Both whitehouse.gov and the Social Security Administration issued press releases following the passage of the One Big Beautiful Bill Act that told America’s seniors that the Trump administration delivered on its “no taxes on Social Security” promise. The devil, however, is in the details, and the details tell a different story.

Line 6 of Form 1040 is where taxpayers report their taxable Social Security Benefits. Taxpayers report their gross taxable benefits on Line 6a and the taxable portion of their benefits on Line 6b. Most tax software calculates the taxable portion of the benefits automatically; taxpayers who do their taxes on paper, by hand, use a worksheet in the Form 1040 instructions. In any case, one would think that if there was no longer a tax on Social Security, the IRS would be getting busy revising Form 1040 to remove Line 6 and to remove the worksheet from the instructions. That isn’t going to happen.

Why? Because that isn’t how the new law works.

The New Senior Deduction

Rather than removing Line 6 from Form 1040, the new law adds a new $6,000 deduction for seniors (age 65 and over). The deduction is up to $12,000 for jointly filed returns (both spouses must be qualifying seniors age 65+). In other words, if a taxpayer starts taking Social Security at 62, they do not get this deduction.

The amount of the deduction is reduced by 6% for any income that exceeds $75,000 (or $150,000 for jointly filed returns). Single seniors with income of $175,000 (or married filers with $250,000 of income) are completely phased out of the deduction.

The deduction is also temporary. The law reads “In the case of a taxable year beginning before January 1, 2029…” That means that this deduction is valid for tax years 2025 through 2028 only unless Congress extends it.

The New Standard Deductions

The Tax Cuts and Jobs Act increased the standard deduction but removed personal exemptions starting in 2018. Those changes were supposed to sunset at the end of this year. The new legislation makes the larger standard deduction and the removal of personal exemptions permanent. The new senior “deduction” is actually a temporary senior exemption based on its location in the tax code.

Late last year the IRS announced that the standard deduction for tax year 2025 would be $15,000 and the additional standard deduction for the aged (65+) or the blind would be $1,600. The new law increases the standard deduction to $15,750 for 2025 and the additional standard deduction to $2,000. Consequently, all taxpayers get an additional $750 in standard deduction and seniors (and the blind) get a further $400 each over the original 2025 amounts.

The New Math

Both increases to the standard deductions are factored into the tax math on whitehouse.gov. The article notes “the current average retirement benefit” is approximately $24,000. According to the Social Security Administration, the average gross monthly benefit (before Medicare premiums are withheld) is $1,976 (or $23,712 per year).

Had the OBBBA not passed, most senior taxpayers would have $16,600 in standard and additional deductions. Under the OBBBA, the amount is $23,750 assuming the senior meets the age and income requirements. The amount is $17,750 for social security beneficiaries who are not yet age 65 and who, consequently, do not get the additional $6,000 senior exemption. Because $23,750 in deductions is enough to offset the average Social Security benefit amount, both the President and the Social Security Administration consider this math “Promises made, promises kept.” At least the promise appears to be kept for low- and middle-income seniors age 65 and over.

Nevertheless, once the entirety of the law surrounding the new deduction is considered, it is clear that “no taxes on Social Security” is not a blanket exemption. Further, self-congratulatory crowing aside, the truth is that most low-income seniors already do not pay taxes on their Social Security benefits.

For example, a single senior whose only income is the average Social Security benefit would not have any taxable income at all according to the Form 1040 Social Security Benefits Worksheet. Even a taxpayer whose Social Security benefits were $75,000 would pay no tax (under any legislation) if Social Security was their only income (and they weren’t subject to any other Form 1040, Schedule 1 adjustments).

Often, however, many low- and middle-income taxpayers have income other than Social Security, such as a small pension or interest income. Consider a single senior with $18,500 per year in pension income and $500 per year in interest on top of the $24,000 in Social Security benefits. According to the worksheet, $3,000 of the Social Security benefits would be taxable. Add that to the $19,000 in pension and interest income and the taxpayer has $22,000 in adjusted gross income.

Had the standard deduction and additional standard deduction remained at the original amounts for 2025, the taxpayer would have $5,400 in taxable income subject to a 10% tax rate. The taxpayer would pay $540 in income tax.

Under the newly legislated standard and additional standard deductions, the taxpayer would have $4,250 in taxable income and would pay $425 in tax for a tax savings of $115. Adding in the additional senior exemption deduction means that this taxpayer has no taxable income at all (the deductions offset all of the taxpayer’s AGI). Again, however, the taxpayer must be over age 65 to get that last $6,000 deduction.

Consequently, while “no taxes on Social Security” is not a permanent blanket exemption, many taxpayers will receive some modest tax relief as a result of the new legislation—at least through 2028.