[Event] Ask the Experts: Tax Law Changes - One Big Beautiful Bill

The One Big Beautiful Bill (OBBB) did not change how much social security income is taxed. Instead, a new senior deduction was created.

Here are the highlights:

• Effective for 2025 through 2028, taxpayers who are age 65 and older may claim an additional deduction of $6,000 per eligible individual.
• The deduction begins to phase out with modified adjusted gross income over $75,000 ($150,000 for a married couple where both spouses qualify). 
• The deduction is available for both itemizing and non-itemizing taxpayers.
• Taxpayers must include the social security number of the qualifying individual(s) on the return.

Regarding your second question: public employee retirement benefits did not change under the OBBB. On the federal return, public pensions continue to be taxable as ordinary income (except for any portion from after-tax contributions). At the state income tax level, how the benefits are taxed depends on your state's specific laws, which range from no tax at all to full taxation.

You also asked if you should withdraw a higher amount than your RMD, in an effort to reduce future taxes. The answer is dependent on many factors. Since the senior deduction is set to expire in tax year 2028, you might want to consider it, but there is a trade-off: you might benefit from a reduction in future taxes by paying the taxes now on a higher retirement distribution, but there's always a possibility that Congress could extend the senior tax deduction past 2028. Also, if you take a higher retirement distribution now, that would push your income up, which could cause you to be in a higher tax bracket, make more of your social security benefits taxable, and potentially increase your Medicare premiums. These are things to consider before making that decision.

I hope this info helps! Thanks for participating in today's event!