Posted on Friday, 4th July 2025 by

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The reconciliation bill HR-1, passed by Congress and signed by the President on Independence Day, ensures that nearly 90% of Social Security beneficiaries will no longer pay federal income taxes on their benefits. This bill provides meaningful and immediate relief to millions of seniors.

Social Security Commissioner Frank Bisignano recently stated, “This is a historic step forward for America’s seniors. For nearly 90 years, Social Security has been a cornerstone of economic security for older Americans. By significantly reducing the tax burden on benefits, this legislation reaffirms President Trump’s promise to protect Social Security and helps ensure that seniors can better enjoy the retirement they’ve earned.”

The new law includes a provision that eliminates federal income taxes on Social Security benefits for most beneficiaries, providing relief to individuals and couples. Additionally, it provides an enhanced deduction for taxpayers aged 65 and older, ensuring that retirees can retain a greater portion of their earnings.

 

Social Security Taxation

According to a White House memo issued July 1, 2025, “88% of all seniors who receive Social Security will pay NO TAX on their Social Security benefits, according to an analysis from the Council of Economic Advisers.”

  • A senior who files as a single taxpayer and receives the current average retirement benefit (approx. $24,000) will see deductions that exceed their taxable Social Security income.
  • Married seniors who both receive the average $24,000 Social Security income — a total of $48,000 in annual income — will also see deductions that exceed their taxable Social Security income.

New Standard Senior Deductions

The new Senior Deductions, as noted in the following chart, will either eliminate or significantly reduce the taxes paid on our Social Security earnings. Married seniors will receive a $12,000 deduction, which compensates for the majority of any Social Security taxes they may be required to pay.

Before the passing of this bill, just over half of all Social Security recipients paid taxes on up to 85 percent of their Social Security benefits because their income exceeded the established threshold for taxation. This deduction significantly offsets the taxes paid for many, but not all, due to income limitations.

Deduction Examples

First, consider the case of a senior filing as a single taxpayer receiving the current average retirement benefit of approximately $24,000 (per Social Security Administration data).  The maximum amount of Social Security included in taxable income is 85% of the benefit, which would be $20,400 in this case.

Under the reconciliation bill, in 2025 this senior would be entitled to $23,750 in deductions – the $15,750 standard deduction, the $2,000 current-law additional deduction, and the $6,000 new law senior deduction – meaning that the reconciliation bill would lead to deductions that exceed the senior’s taxable Social Security income.

Second, consider a married couple of seniors both receiving the average $24,000 Social Security income.  The couple will have a total of $48,000 in annual income, of which at most 85% is taxable ($40,800).  Under the bill, this couple would be entitled to deductions that exceed their taxable Social Security income.

Six One Way, Half A Dozen the Other

This deduction is how the administration achieved its goal of exempting Social Security from taxation. Instead of changing the tax laws, they established a new senior deduction that achieved the same thing to a degree. Some will still pay taxes, but most individuals will benefit from this new standard senior deduction.

Income limits apply. Singles with income under $75,000 and couples under $150,000 qualify for the full deduction and it phases out gradually and ends completely for singles earning over $175,000 and couples over $250,000.

This tax break is available from 2025 through 2028 and may be renewed by future legislation.

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Disclaimer: The information provided may not cover all aspects of unique or special circumstances.  Federal regulations, medical procedures, investment, and benefit information are subject to change. To ensure the accuracy of this information, contact relevant parties for assistance, including OPM’s retirement center.

Over time, various dynamic economic factors relied upon as a basis for this article may change. The information contained herein should not be considered investment advice and may not be suitable for your situation. This service is not affiliated with OPM or any federal entity. You should consult a financial, medical, or human resource professional where appropriate. Neither the publisher nor the author shall be liable for any loss or other commercial damages, including but not limited to special, incidental, consequential, or other damages.

Last 5 posts by Dennis Damp

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Posted in ANNUITIES / ELIGIBILITY, BENEFITS / INSURANCE, ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION, WELLNESS / HEALTH | Comments (2)


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2 Responses to “Social Security Tax Relief for Millions of Senior Citizens”

  1. Paul Ries Says:
    July 5th, 2025 at 9:41 pm

    I believe your most recent article, “Social Security Tax Relief for Millions of Senior Citizens” is misleading.
    The bill does not contain any provisions to eliminate or even reduce taxes on Social Security. What it does do is reduce some people’s taxes through a new temporary $6,000 deduction for about 24% of seniors.
    Social Security in a message many labeled as partisan, said the legislation included “a provision that eliminates federal income taxes on Social Security benefits for most beneficiaries”. You parroted that message, yet is bears repeating that the bill does not contain any provisions to eliminate or even reduce taxes on Social Security.
    Please review reports from reliable sources –
    https://www.washingtonpost.com/business/2025/07/04/social-security-taxes/
    https://thehill.com/business/personal-finance/5381335-senate-social-security-tax-deduction/
    https://www.cbsnews.com/news/big-beautiful-bill-social-security-tax-trump/
    In the past, I have found your articles and advice to be credible. Not so this time. Credibility seems to be slipping. I am disappointed.

  2. Dennis Damp Says:
    July 6th, 2025 at 7:19 am

    The Senate and House Parliamentarians didn’t allow changes to the Social Security tax code in the reconciliation bill. Hence, the House and Senate worked around that and developed a senior deduction that provided a similar result, less taxes for seniors. The article outlines how this work-a-round achieved this. The bill provides similar relief in a way that it could be included in the bill. The House only approved a $4,000 deduction, the Senate increased it to $6,000. This bill and new senior deduction will be a huge help to many. The partisan articles you mention purposely left out these details. My sources for this article were the bill itself, Social Security, and the Whitehouse press release. The President promised relief on Social Security taxes during his re-election campaign, and the House and Senate approved this workaround to provide relief to millions of Americans. Even Axios, who is considered a liberal news outlet, said in a recent article, “Trump promised to eliminate taxes on Social Security income. Lawmakers couldn’t pull that off entirely, given the constraints of passing a reconciliation bill and changing Social Security law. This break comes close.”

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