Posted on 07/07/2025 10:59:02 AM PDT by Red Badger
As Congress was approving President Trump's "big, beautiful bill" on Thursday, the Social Security Administration touted the legislation by stating that it "eliminates federal income taxes on Social Security benefits for most beneficiaries."
That claim, which echoes previous promises by Mr. Trump to remove taxes on Social Security, may have come as welcome news for the millions of older and disabled people who depend on the program for income. So does the bill deliver? Not entirely.
In a press release, the SSA said that the tax and spending package, which the president is set to sign into law on Friday, "ensures that nearly 90% of Social Security beneficiaries will no longer pay federal income taxes on their benefits."
That figure draws on a June analysis by the White House's Council of Economic Advisers that said 88% of seniors — or 51.4 million people — on Social Security will pay no tax on their payments under the measure because their deductions would exceed their taxable benefits. More than 70 million Americans collect Social Security benefits, according to the SSA.
The bill "includes the largest tax break in American history for our nation's seniors," CEA said, adding that "the deductions ensure that seniors who earned their Social Security through years of hard work get more money back in their pockets."
Yet while it's true that the bill offers fresh tax relief for some people on Social Security, it is misleading to suggest that the measure does away with taxes on Social Security benefits, policy experts told CBS MoneyWatch. Rather, the bill offers relief by creating a new "bonus" tax deduction for beneficiaries.
"While the deduction does provide some relief for seniors, it's far from completely repealing the tax on their benefits," Garrett Watson, director of policy analysis at the Tax Foundation, a Washington, D.C., think tank, told The Associated Press this week ahead of Congress approving the bill.
The Social Security Administration did not respond to a request for comment. The White House declined to comment.
How does the "big, beautiful bill" impact Social Security?
The bill doesn't eliminate taxes on Social Security, but rather introduces a temporary deduction that beneficiaries can claim to lower their federal income tax. Notably, that deduction applies to all of a senior's income — not just to Social Security benefits.
Bobby Kogan, senior director of federal budget policy at the Center for American Progress, a nonpartisan think tank in Washington, D.C., told CBS MoneyWatch the bill doesn't change the taxation of Social Security benefits. Eliminating taxes on Social Security under the bill was impossible because of a congressional restriction (dubbed the Byrd Rule after late West Virginia Sen. Robert Byrd) that limits what the Senate can include in a reconciliation bill like the Republican budget measure.
What the bill does do is provide a temporary tax deduction of up to $6,000 for seniors aged 65 and older. The tax break is available to people with an adjusted gross incomes of $75,000 or less and $150,000 or less for couples filing jointly. The deduction is set to expire at the end of 2028.
"Each spouse can take the deduction, for a total of $12,000, if both are 65-plus," AARP explains in its analysis of the budget bill. The deduction phases out for people who earn above those amounts.
Social Security recipients under 65 and people above the specified income thresholds are ineligible to claim the new tax deduction. It also won't benefit the many low-income seniors who already pay no federal income tax because they earn too little.
"Boosting the amount that you get to write off when you already get to write off everything does not help you at all," Kogan said.
The Tax Foundation, a nonpartisan policy research group, said in a June report that exempting Social Security benefits from taxation would not change the after-tax income for the bottom 20% of taxpayers, noting that "those taxpayers are already exempt from taxation on their Social Security benefits."
The biggest beneficiaries of the bill will be higher-income seniors, said Martha Shedden, president and co-founder of the National Association of Registered Social Security Analysts, which focuses on Social Security education.
"The people who benefit by definition have to be richer, and people who benefit the most are the richest people," Kogan added.
More pressure on Social Security?
Providing a temporary tax deduction is likely to help some Social Security recipients, but it could also worsen the retirement program's fragile financial state, Kogan said. Social Security is on track to deplete its trust fund by 2034 if Congress does not take action.
"We already have a problem of not enough money going into the trust fund. This bill makes even less money go into the trust fund," he said.
The Penn Wharton Budget Model, a University of Pennsylvania think tank that studies fiscal issues, estimates that eliminating income taxes on Social Security benefits would lower federal revenue by $1.5 trillion over 10 years and increase the federal debt by 7% by 2054.
As the debate continues over how to shore up Social Security while offering tax relief to older Americans, one thing is clear, and perhaps politically unpalatable: cutting benefits. According to a AARP-funded survey from the National Academy of Social Insurance released in January, 85% of Americans think benefits should not be reduced, or that they should be increased, even if it means raising taxes on some or all Americans.
"Virtually all Americans want their Social Security benefits to be preserved and are willing to do what it takes to ensure the program continues to provide meaningful support for future generations," said AARP Chief Public Policy Officer Deb Whitman in a statement after the survey was released.
The Associated Press contributed to this report.
Will it go back to BJ’s time?
If it did, the re would be a judge somewhere to declare it unconstitutional!...................
But why is the social security provision temporary? Was this a rules thing?
As usual the GOP Senate shot itself, and Conservatives, in the foot. While they have repeatedly demonstrated they have no problem spending trillions of dollars we don’t have taking care of any wack job foreight aid package, they absolutely hate having to do anything that actually benefits working Americans
No, it does nothing.
Nor does the “no tax on tips” nonsense.
I will note that the removal of the tax on suppressors and SBRs destroys the Constitutionality of the law.
“Boosting the amount that you get to write off when you already get to write off everything does not help you at all,” Kogan said. You mean tax deductions only apply to people who pay taxes?
I think the no tax on tips is also temporary, I think it expires in 2028.
A couple of reasons for these provisions, get votes from RINO Republicans and to make it a campaign issue, who in 2028 is going to pledge to end no tax on tips and raise taxes on social security two taxes that overwhelmingly favor the middle and working-class voter.
Could have fooled me.
There are people in and out of government who are not in the least bit interested in preserving Social Security benefits, as they so freely disburse them to people who are not eligible or deserving in any way, thereby running it down far more quickly than anything a tax break would do.
So, effectively the “Hyde anendment” blocked any meaningful social security tax relief — despite the campaign promises to remove taxes on pension incomes and distributions.
I am not a political expert. But it seems to me that the budget bill was the first real chance of removing taxes from retirement
Pensions like social security.
A increasing number of states don’t tax retirement. How can we get the (usually much greater burden of) federal taxes off retirees, too?
President Regan instated taxes on SS. There were none prior.
I assume if you claim standard deduction it does nothing
> What the bill does do is provide a temporary tax deduction of up to $6,000 for seniors aged 65 and older. <
They could have gone for a tax deduction or a tax credit here. Evidently it’s a deduction, which is by far the less favorable of the two. 🙁
A tax deduction reduces your taxable income.
A tax credit reduces the amount of tax you owe, dollar for dollar.
(If I’ve got this wrong, someone please correct me.)
Congress imposed it. Reagan signed it into law.
Biden was a driving force behind it.
“But why is the social security provision temporary? Was this a rules thing?”
Yes. The reconciliation bill has to stay withing the budget window.
The ‘Byrd rule’ (yes, Joe’s demoKKKrat pal) prevented policy, only budget considerations from the BBB, so they say.
Yeah, now the NRA, GOA and conservative patriots everywhere are licking our chops over removing them from the NFA,
if not removing the NFA itself with original legislation.
Why not? Just resign it to the dustbin of bad ideas. Removing the tax was a half-measure.
1 1.”I assume if you claim standard deduction it does nothing”
Wrong assumption.
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