Senior Counsel
The “Big Beautiful Bill” (BBB) is touted as eliminating income tax on Social Security benefits with the “No Tax on Social Security” slogan. But there is no income exclusion for Social Security benefits in the BBB. So what’s going on?
Instead of a blanket exclusion from income, the BBB grants taxpayers age 65 or older an additional fixed deduction of $6,000 per person ($12,000 for a married couple if both spouses qualify). This amounts to an additional deduction for qualifying taxpayers that applies regardless of the amount of their Social Security benefits. There also is an income-based phase out of this deduction for taxpayers with a modified adjusted gross income of over $75,000 ($150,000 for those filing joint returns). So not all Social Security recipients will qualify for the deduction. Here are some of the details:
- To qualify, a taxpayer must attain age 65 on or before the last day of the tax year in question.
- Married taxpayers must file a joint income tax return in order to qualify for the deduction.
- The deduction is available both to taxpayers who take the standard deduction and to those who itemize their deductions.
TAKEAWAY: The BBB provisions would more accurately be called the “Supplemental Senior Citizen Tax Deduction.” And although it does not directly relate to Social Security benefits, it is projected to provide some tax relief to over 80 percent of Social Security recipients.