Social Security Tax

[mhenry550]

I understand  that a tax credit will be given for Social Security, but if you are working, will Social Security  continue to be taxed and/or are there no taxes for Social Security under the new bill.   Currently, you pay taxes on Social Security if your are working and depending on what you make, it is taxable at either 50% or 85%.  It appears from what I read, that seniors are just receiving a tax credit based on income under a specific amount.

Thank you, MGHC.

[K M W]

Hi, mhenry550, you are correct, the One Big Beautiful Bill (OBBB) does NOT make any changes to how social security is taxed.  Rather, the OBBB provides a new, temporary deduction for individuals aged 65 and older. This deduction is $6,000 per eligible individual ($12,000 for a married couple where both spouses qualify). This is in addition to the standard deduction already available to seniors.

So, whether a person is currently receiving social security or not is irrelevant to the new tax deduction - as long as you meet the age requirement (age 65 or older), and you do not exceed the income thresholds (the additional deduction begins to phase out when Modified Adjusted Gross income exceeds $75,000 for single files, or $150,000 for married couples filing jointly), then you will be eligible for the additional deduction.  Note that this new deduction for seniors is a temporary provision, effective for tax years 2025 through 2028.

[SwapnaM]

There is no separate tax credit for Social Security. Instead, it provides a new tax deduction that significantly reduces or eliminates the tax burden for many seniors, particularly those with low to moderate income. 

The new law doesn't get rid of Social Security taxes completely. It helps by giving seniors a new, temporary $6,000 tax deduction.

• Yes, Social Security can still be taxed if your Modified Adjusted Gross Income (MAGI) exceeds certain thresholds.
• The old 50% and 85% inclusion rules still apply in some cases, but:
  • The new senior deduction ($6,000 per person) and standard deduction ($15,750 single / $31,500 joint) significantly reduce taxable income.
  • This means many working seniors will still owe no tax on their Social Security, unless their income is quite high.
  • The new deduction begins to phase out for single filers with a Modified Adjusted Gross Income (MAGI) over $75,000 and for married couples filing jointly with a MAGI over $150,000. It is completely phased out for single filers at $175,000 and for joint filers at $250,000.

@mhenry550 Thanks for the question!!

[Spyder943]

so the new deduction will show up on form 1040 in the same area as the standard deduction,  correct?

[SwapnaM]

The IRS is expected to release a new version of Form 1040 and Form 1040-SR for the 2025 tax year, along with instructions that will specify exactly where this new deduction should be reported. TurboTax will also update their programs to handle this new deduction automatically. It should show up as a distinct line item on the tax form(same area where the standard deduction appears) or figured on a worksheet based on IRS guidance.

@Spyder943 Thanks for the question!!

[K M W]

The new deduction is separate and different from the standard deduction, meaning you can either take the standard deduction OR itemized deductions, and still qualify for this additional deduction. Technically speaking, it is not considered an increase to your standard deduction; rather, it is a separate deduction that will be "below the line" - in other words, it will be a deduction that comes AFTER adjusted gross income (AGI), so it will not have an impact on your AGI.