Republican presidential nominee former President Donald Trump speaks at a marketing campaign rally in Asheville, N.C., Wednesday, Aug. 14, 2024.
Matt Rourke | AP
The Social Safety Administration despatched what consultants say is a deceptive e mail to customers final week, describing President Donald Trump‘s “one huge stunning invoice” as “long-awaited tax reduction to hundreds of thousands of older Individuals.”
In that e mail and a July 3 press release, the company mentioned the laws will make it so “almost 90%” of Social Safety beneficiaries now not pay federal revenue taxes on advantages. It attributed that to a further $6,000 senior deduction and one other unspecified provision.
Tax consultants say that’s not correct.
The laws doesn’t, because the company put it, embrace “a provision that eliminates federal revenue taxes on Social Safety advantages for many beneficiaries.” Furthermore, whereas the Social Safety Administration memo mentioned the regulation helps shield Social Safety, consultants say the provisions weaken the program’s funding by lowering the tax cash it receives.
“It is merely not appropriate to say that there is a provision on this invoice that’s going to get rid of the Social Safety profit tax for 90% of the inhabitants,” mentioned Howard Gleckman, senior fellow on the City-Brookings Tax Coverage Middle.
“And it is also simply flawed to say that that is going to protect the solvency of Social Safety,” Gleckman mentioned.
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Trump had mentioned on the marketing campaign path that he deliberate to get rid of federal revenue taxes on Social Security benefits. Nonetheless, the reconciliation course of by which the finances and tax laws was handed prohibits modifications to Social Safety.
The Social Safety Administration didn’t return requests for remark. The White Home deferred remark to the Social Safety Administration.
The Council of Financial Advisers, an company inside the presidential government workplace, estimates that modifications within the laws will assist push the portion of seniors with exemptions and deductions exceeding Social Safety revenue to 88%, from 64% below present regulation.
Those tax changes embrace a better normal deduction, the present senior deduction already in impact and the brand new extra senior deduction or “bonus.”
How the $6,000 senior ‘bonus’ works
The brand new tax package deal contains a further deduction of as much as $6,000 for seniors ages 65 and over.
Whereas the extra senior deduction has been referred to as a “bonus” within the legislative textual content, it’s technically a deduction, which reduces the quantity of revenue that’s topic to taxes.
Notably, that doesn’t essentially imply seniors will see a $6,000 “bonus” verify within the mail or of their refunds at tax time.
“This isn’t like what occurred throughout Covid, when the federal government was writing checks to individuals,” Gleckman mentioned.
Per the laws, the deduction will likely be in place for tax years 2025 by 2028. Will probably be obtainable to eligible taxpayers no matter whether or not they take the usual deduction or itemize their returns.
However eligibility will depend on revenue. Taxpayers with as much as $75,000 in modified adjusted gross revenue — or as much as $150,000 if married and submitting collectively — could obtain the complete deduction. For incomes above these thresholds, the deduction regularly phases out.
Center-income seniors stand to profit essentially the most from the change, based on tax consultants.
How the bonus impacts tax on Social Safety advantages
An individual holds an indication studying ‘Save Our Social Safety’ in assist of truthful taxation close to the U.S. Capitol in Washington, D.C. on April 10, 2025. Tax justice advocates attended a rally to talk out towards President Trump’s tax cuts for the rich, and to induce members of Congress to intervene.
Bryan Dozier | Afp | Getty Photos
Social Safety benefits are taxed primarily based on mixed revenue, or the sum of adjusted gross revenue, nontaxable curiosity and half of Social Safety advantages.
People with between $25,000 and $34,000 in mixed revenue could have as much as 50% of their Social Safety advantages taxed. If their mixed revenue is greater than $34,000, as much as 85% of their advantages could also be taxed.
For married {couples} with mixed revenue between $32,000 to $44,000, as much as 50% of their advantages could also be taxed. If they’ve over $44,000, as much as 85% of their advantages could also be taxed.
These thresholds should not adjusted for inflation, which implies that over time extra beneficiaries pay taxes on their advantages.
As a result of the brand new senior bonus is an above-the-line deduction, which means it’s subtracted from gross revenue to calculate adjusted gross revenue, it could not directly scale back tax legal responsibility on Social Safety advantages.
Who could profit from the senior ‘bonus’
The extra senior deduction won’t have an effect on taxes on Social Safety advantages for people and {couples} beneath these revenue thresholds, since they already should not topic to levies on their advantages, Gleckman mentioned.
Nor will it assist individuals who earn an excessive amount of to qualify for the brand new deduction. Greater-income people and married {couples} with greater than $75,000 or $150,000 in modified adjusted gross revenue, respectively, could not see their Social Safety profit taxes decreased, except they’re within the phaseout window.
For taxpayers who qualify, the senior deduction could scale back, quite than get rid of, their taxes on advantages, Gleckman mentioned. The City-Brookings Tax Coverage Middle estimates that fewer than half of older adults will profit from the senior deduction, he mentioned.
Even those that profit will not essentially see zero taxes; they’re going to simply see fewer taxes, Gleckman mentioned.
“The individuals who profit essentially the most, we estimate, are individuals who made between $50,000 and $200,000,” Gleckman mentioned.
The laws could also be extra beneficiant to seniors than to taxpayers in different age cohorts, mentioned Alex Durante, senior economist on the Tax Basis.
“The improved adoptions general are going to scale back tax liabilities for seniors considerably, and for some individuals, it is going to most likely wipe out any tax legal responsibility they’ve,” Durante mentioned.
“But it surely will depend on the place they’re within the revenue distributions,” he mentioned.
How ‘huge stunning invoice’ impacts Social Safety funding
Whereas sure seniors may even see monetary advantages now, the improved senior deduction will price the Social Safety program, which is already below monetary pressure.
The brand new extra senior deduction and different modifications in Trump’s “huge stunning invoice” could scale back taxation of Social Safety advantages by roughly $30 billion per 12 months, estimates the Committee for a Accountable Federal Price range.
That may speed up the projected insolvency date for the Social Safety belief fund dedicated to retirement advantages to late 2032, up from the at the moment projected date of early 2033, based on CRFB.
To assist shore up this system’s funds, Congress faces a selection of elevating taxes, chopping advantages or a mix of each.
The earlier any modifications are enacted, the extra time there may be for them to be phased in, based on consultants.
“Yearly we delay reforming this system means these modifications must be steeper and have an effect on extra individuals nearer to retirement age,” CRFP President Maya MacGuineas wrote in a current op-ed.