There is a great deal of confusion over the Big Beautiful Bill Act’s (BBBA) impact on Social Security taxes. Some even claim the Act eliminates Social Security taxes entirely. Does it?
The short answer is no. In fact, Social Security benefits, per se, are not subject to federal taxation at all. However, when one’s “combined income” exceeds specified limits, Social Security benefits may become taxable. Combined income is calculated by adding one’s Adjusted Gross Income and half of one’s social security income, then subtracting any tax-exempt interest payments.
For single filers the combined income limits are:
- Less than $25,000, no federal tax on Social Security benefits
- $25,000-$34,000, up to 50% of benefits may be taxable
- $34,000+, up to 85% of benefits may be taxable
For married couples filing jointly the numbers are:
- Less than $32,000, no federal tax
- $32,000-$44,000, up to 50% may be taxable
- $44,000+, up to 80% may be taxable
As you can see, many people will have a combined income that exceeds the above limits, meaning a portion of their Social Security payments will indeed be subject to federal taxes. Some states even levy additional taxes on Social Security benefits; fortunately, Massachusetts is not one of them.
So, if the BBBA doesn’t eliminate Social Security taxes, how can it help lower one’s tax liability?
The Act’s new “Senior Bonus” may result in a significant number of elders paying less federal income tax on their benefits. The Senior Bonus applies to people 65 years of age and older. Individual filers can claim a deduction of up to $6,000, while married joint filers can claim up to $12,000. (This is in addition to the standard deduction, which for 2025 is set at $15,750 for single filers and $31,500 for married joint filers.) The full deduction for the Senior Bonus is available to individuals with a modified adjusted gross income of up to $75,000 ($150,000 for couples filing jointly) and is gradually phased out for higher incomes.
The bottom line? According to the Council of Economic Advisers, the new deduction combined with existing tax breaks means 88% of seniors 65 or older will not have to pay federal income tax on their Social Security benefits.
While the Senior Bonus does not benefit Social Security recipients under age 65, and the deduction is set to expire in 2028, it is good to see the federal tax code provide some help for elders. To know how it will impact you, speak with your tax professional.
Until next time, take care…