Social Security Tax Changes: Separating Fact from Fiction
- Christian West
- Sep 15
- 4 min read
When Congress passed the 2025 “One Big Beautiful Bill” (OBBB), the headlines came fast and loud. Some news outlets and even a Social Security Administration (SSA) email suggested that the new law would eliminate federal income taxes on Social Security benefits. That claim spread quickly—but it isn’t entirely accurate.
The truth is more measured. The OBBB does not repeal the long-standing rules that make up to 85% of Social Security benefits taxable. Instead, it introduces a temporary senior tax deduction that could significantly lower the taxable income of retirees with modest to middle incomes. In the right circumstances, this deduction could reduce or even eliminate taxes on Social Security benefits—but it doesn’t rewrite the system altogether.
Let’s break down what’s really happening and what it means for retirees.
The Rules Haven’t Changed
For decades, Social Security benefits have been subject to taxation depending on your income. The formula uses “provisional income,” which combines adjusted gross income (AGI), non-taxable interest, and half of your Social Security benefits.
If your provisional income is below certain thresholds, your benefits aren’t taxed.
As income rises, up to 85% of your benefits can be included in taxable income.
The OBBB leaves these rules intact. If you’re a higher-income retiree, you could still see the maximum portion of your Social Security taxed.
What the OBBB Adds
The real change is the creation of a new senior tax deduction available for tax years 2025 through 2028. Here’s how it works:
Single filers age 65 and older can claim up to a $6,000 deduction if their modified adjusted gross income (MAGI) is $75,000 or less.
Married couples filing jointly can claim up to a $12,000 deduction with MAGI of $150,000 or less.
The deduction begins to phase out for incomes above those thresholds.
This deduction reduces your overall taxable income. While it does not remove the taxability of Social Security benefits directly, it may push your income down far enough that your benefits fall below the tax threshold.
In plain language: the new deduction won’t erase Social Security taxes for everyone—but it could for many middle-income retirees.
Who Benefits Most?
The deduction is targeted toward retirees who sit in the middle income range—those earning enough to see some of their Social Security taxed, but not so much that they exceed the income thresholds.
Low-income retirees: Many already pay no tax on Social Security and won’t see a large benefit.
High-income retirees: Those above the $75,000/$150,000 MAGI thresholds may not qualify for the full deduction, and their benefits will likely remain taxable.
Middle-income retirees: This is where the deduction makes the biggest difference, potentially reducing taxable income enough to eliminate benefit taxation.
Why the Confusion?
Shortly after the bill passed, a White House press release and an SSA email suggested that the OBBB would eliminate federal income taxes on Social Security benefits for “most beneficiaries.” That wasn’t technically correct. IRS Notification
The SSA later issued a correction: the bill provides an enhanced deduction, not a blanket exemption. Unfortunately, the initial wording created widespread misunderstanding and fueled speculation.
Example: Before and After
Consider an example married couple filing jointly with a MAGI of $140,000. Under the old rules, part of their Social Security benefits would likely be taxable.
With the new OBBB deduction, they could subtract $12,000 from their taxable income—potentially lowering their tax bracket and reducing or eliminating taxation on their Social Security benefits.
The impact will vary by household, but for some, this could mean thousands of dollars in tax savings each year from 2025 to 2028.
What Retirees Should Do
Review your income plan. The deduction is temporary—set to expire after 2028—so plan accordingly.
Model different income sources. Required minimum distributions (RMDs), pensions, and rental income can all affect whether you qualify.
Work with a tax-aware financial planner. Coordinating withdrawals, Roth conversions, and other strategies alongside this new deduction can help you maximize the benefit.
Stay skeptical of headlines. Not every law does what the press release says.
Bottom Line
The OBBB doesn’t erase Social Security taxes, but it does give seniors a valuable, temporary tool to lower taxable income. For many middle-income retirees, this could reduce or eliminate taxes on their Social Security benefits—at least for the next four years.
The key is careful planning. By understanding how the deduction works and aligning it with your broader income strategy, you can make the most of this short-term opportunity.
About Rigden Capital Strategies
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Disclosure: This material is for informational and educational purposes only. It should not be considered investment, tax, or legal advice. The information contained herein is based on current legislation as of 2025 and may change with future updates. Readers should consult with a qualified tax professional, attorney, or financial advisor before making any decisions regarding their personal situation. Investing involves risk, including possible loss of principal.
