Social Security tax not eliminated: What you need to know now
A flood of political promises and confusing headlines has left many older Americans asking: Do I still have to pay taxes on my Social Security benefits in 2025?
The short answer: Yes, in most cases. Here’s what really changed — and what didn’t — under the new law signed by President Donald Trump.
What the 2025 law actually did — and didn’t — change
On July 4, 2025, President Trump signed what he dubbed “The One Big Beautiful Bill,” touting it as a historic win for seniors. He claimed it would eliminate federal income taxes on Social Security benefits. But tax professionals and policy analysts say that’s not what the law actually does.
- Social Security benefits remain taxable — up to 85%, depending on income.
- There is no specific exemption for Social Security income.
- The bill did create a new tax deduction for older taxpayers: the “senior bonus.”
What is the “senior bonus” deduction?
The senior bonus is a temporary, age-based deduction of up to $6,000 for individuals aged 65 and older — or $12,000 for qualifying married couples filing jointly.
Key rules:
- Available for tax years 2025 through 2028
- Phases out starting at $75,000 MAGI for singles and $150,000 for joint filers
- Ends entirely at $175,000 (single) and $250,000 (joint)
- You must file jointly to qualify as a couple
- Not available to taxpayers under 65
It’s a deduction, not a credit, meaning it reduces taxable income — but does not eliminate tax liability on its own.
Common misunderstandings: Why some seniors will still pay taxes
Despite White House and SSA emails suggesting “no taxes on Social Security,” financial professionals warn that retirees should not expect full tax relief.
“Yes, your Social Security is still 85% taxable,” wrote Adam Markowitz, a tax agent in Florida.
“Pay attention to what [Trump] signed, not what he says.”
Who will still owe taxes?
- Retirees with combined income over $25,000 (single) or $32,000 (married) may pay tax on up to 85% of their benefits.
- Combined income includes:
- Adjusted gross income (AGI)
- Nontaxable interest (e.g., municipal bonds)
- Half of your Social Security benefits
Even with the new senior deduction, many retirees will still cross the income thresholds that trigger taxation.
How much will the senior bonus actually save?
The savings depend on your tax bracket and MAGI:
- At a 12% tax rate, a $6,000 deduction could reduce taxes by $720.
- But if your income exceeds the limits, the deduction phases out at 6%.
Example:
A single retiree with $90,000 MAGI would exceed the $75,000 threshold by $15,000.
→ $15,000 × 6% = $900
→ $6,000 – $900 = $5,100 deduction
Why this confusion matters
According to the Tax Policy Center, roughly half of all Social Security beneficiaries still pay federal income taxes on their benefits. The SSA’s claim that “90% will no longer pay tax” is based on optimistic projections that don’t match reality.
“The system is already confusing,” wrote tax policy expert Howard Gleckman.
“This latest messaging only makes things worse.”
What retirees should do next
- Don’t assume your benefits are tax-free.
- Check your income sources to determine if you’ll owe taxes.
- Use IRS worksheets or consult a tax professional for 2025 planning.
- Don’t rely on campaign statements or agency emails as official tax guidance.