Did social security income become not taxable in the big bill.

[dwlange59]

Did social security income become not taxable with the big bill?

[xmasbaby0]

https://turbotax.intuit.com/tax-tips/general/taxes-2021-7-upcoming-tax-law-changes/L3xFucBvV?cid=em_...

[Opus 17]

Under current law, about 69% of seniors don’t pay income tax on Social Security. That percentage will raise to 88% with the new law. Social Security is never taxable if it is your only income, but it can be partly taxable if you have outside income.  The law has an increased deduction for seniors, that will help to make their Social Security non-taxable when they have outside income.  But if your outside income is high enough, your Social Security could still be taxable.

[dmertz]

The bill made no changes specific to how Social Security income is taxed, no changes to section 86 of the tax code.  The bill simply slightly increased the standard deduction for those using the standard deduction and, for those who itemize deductions, increased the limit on the deduction for state and local income taxes through 2029, and added a deduction an exemption through 2028 for those age 65 and over if their income is below a certain threshold.  These changes affect the taxability of all income, not just Social Security income, so suggestions that changes made by this bill specifically affect how Social Security income is taxed is mere handwaving.

[Opus 17]

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@dmertz wrote:

The bill made no changes specific to how Social Security income is taxed, no changes to section 86 of the tax code.  The bill simply slightly increased the standard deduction for those using the standard deduction and, for those who itemize deductions, increased the limit on the deduction for state and local income taxes through 2029 and added a deduction through 2028 for those age 65 and over if their income is below a certain threshold.  These changes affect the taxability of all income, not just Social Security income, so suggestions that changes made by this bill specifically affect how Social Security income is taxed is mere handwaving.

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I'm not sure that is entirely correct.  The summary of the bill that I read indicated that the temporary $6000 senior deduction would be applied above the line (that is, it is available whether seniors itemize their deductions or not.)

For example, suppose you are married, over 65 and have $40,000 of deductions.  The current standard deduction is about $34,000, so under current law you would use the itemized deductions.  The temporary increase is applied whether you itemize or not, so instead of using a standard deduction of $34,000 + $12,000 =$46,000, you would get an itemized deduction of $40,000 + $12,000 =$52,000.

I agree the actual text is not clear on this (section 70103(a)(3).

One summary is here. https://govfacts.org/explainer/how-the-one-big-beautiful-bill-impacts-social-security/

The bottom line is that, because of how tax on social security is calculated, low income individuals already pay no tax on the social security.  Middle income individuals will see the tax on their social security greatly reduced. The SSA estimates that the number of seniors whose social security is not taxed will increase from 69% to 88% (or 90%). 

And, this is a temporary measure that expires December 31, 2028, unless it is extended by another act of congress in the future. 

[SteamTrain]

AND.....of course, you will still need to enter your SSA-1099 into the tax software.  Then the entirety of your income situation will be taken into account, before the software determines whether any of the SSA benefits income becomes taxable

[dmertz]

Opus 17, you are correct.  For the "Senior Deduction," I changed my reply to indicate that it's actually done as a personal exemption and added a comma to separate it from the change to itemized deductions.