I acquired an e-mail from Social Safety Administration on July 3, applauding the brand new 2025 Trump tax legislation — One Massive Lovely Invoice Act. The e-mail stated,
The brand new legislation features a provision that eliminates federal earnings taxes on Social Safety advantages for many beneficiaries, offering reduction to people and {couples}.
I learn the One Massive Lovely Invoice Act. This half will not be true. The brand new 2025 Trump tax legislation doesn’t eradicate federal earnings 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 supplies an enhanced deduction for taxpayers aged 65 and older, making certain that retirees can preserve extra of what they’ve earned.
This half is true, however the e-mail failed to say that the improved deduction is solely momentary, and it has nothing to do with Social Safety anyway.
One Massive Lovely Invoice Act created a brand new $6,000 senior deduction, accessible solely from 2025 via 2028, to 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 earnings exterior Social Safety (pension, curiosity, dividends, capital beneficial properties, and many others.), you’ll pay greater taxes than your neighbor once you add your taxable Social Safety advantages on high.
Should you’re 65 this 12 months and also you’re delaying your Social Safety, you continue to qualify for this new senior deduction. Whenever 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 legislation.
No Change to AGI
The brand new senior deduction goes after the usual deduction or itemized deductions. It doesn’t decrease your AGI. It doesn’t have an effect on something that qualifies based mostly on the AGI, for instance, Medicare premiums beneath 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 further tax profit could also be price kind of than the tax in your Social Safety advantages. You will have the brand new tax profit on one facet and the tax on Social Safety on the opposite facet. The 2 are utterly unrelated.
It’s like some individuals saying they picked up $5 on the road and due to this fact their espresso is free. The 2 issues don’t have anything to do with one another. You don’t have to purchase espresso after selecting 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 legislation didn’t change any of that calculation.
Revenue Phaseout
Not solely is the brand new senior deduction momentary, nevertheless it additionally phases out as your earnings goes up. You get the complete $6,000 deduction when you’re single and your modified adjusted gross earnings is $75,000 or much less ($150,000 or much less for married submitting collectively; you get $0 deduction when you’re married submitting individually).
As your earnings goes up, the deduction is lowered by 6% of any extra earnings above these thresholds. The deduction disappears when your earnings is $175,000 or extra when you’re single, $250,000 or extra when you’re married submitting collectively and solely one in every of you is 65, or $350,000 when you’re married submitting collectively and each of you’re 65.
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, One Particular person Is 65+
| Revenue | Senior Deduction |
|---|---|
| $150,000 or much less | $6,000 |
| $160,000 | $5,400 |
| $170,000 | $4,800 |
| $180,000 | $4,200 |
| $190,000 | $3,600 |
| $200,000 | $3,000 |
| $210,000 | $2,400 |
| $220,000 | $1,800 |
| $230,000 | $1,200 |
| $240,000 | $600 |
| $250,000 or above | $0 |
Married Submitting Collectively, Each Are 65+
| Revenue | Senior Deduction |
|---|---|
| $150,000 or much less | $12,000 |
| $160,000 | $11,400 |
| $170,000 | $10,800 |
| $180,000 | $10,200 |
| $190,000 | $9,600 |
| $200,000 | $9,000 |
| $210,000 | $8,400 |
| $220,000 | $7,800 |
| $230,000 | $7,200 |
| $240,000 | $6,600 |
| $250,000 | $6,000 |
| $260,000 | $5,400 |
| $270,000 | $4,800 |
| $280,000 | $4,200 |
| $290,000 | $3,600 |
| $300,000 | $3,000 |
| $310,000 | $2,400 |
| $320,000 | $1,800 |
| $330,000 | $1,200 |
| $340,000 | $600 |
| $350,000 or above | $0 |
[Image Credit: Google Gemini]
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