No Tax on Social Security?
- Alex Potter, CFP®
- Nov 3
- 2 min read
Last month we covered the new tax rules for overtime pay. This month, we will look at another key update from the OBBBA - the new Senior Deduction.
One of the major talking points in this year’s One Big Beautiful Bill Act (OBBBA) was the question on how it would impact taxes on Social Security. While Social Security benefits remain taxable under current rules, the bill introduced a new “bonus” deduction for taxpayers over the age of 65 to help reduce their tax liability. According to the Council of Economic Advisors, up to 88% of Americans will not pay tax on their Social Security.
What’s New:
For tax years 2025-2028, taxpayers age 65+ will receive an additional $6,000 deduction. This is in addition to the existing age-based standard deduction of $2,000 single or $1,600 per qualifying individual if MFJ.
If both spouses are over 65, deduction is $12,000.
The deduction phases out when MAGI exceeds $75,000 for single or $150,000 MFJ.
Fully phases out at $175,000 single or $250,000 MFJ.
Key Points:
If your household income has remained relatively stable, you could see a larger refund when filing your 2025 tax return in 2026.
You must turn 65 prior to December 31st, 2025 to receive this new deduction for 2025.
You can claim this new senior deduction whether you itemize or take the standard deduction.
Planning Ideas:
Consider using any extra refund to pay down debt, boost emergency savings, or invest.
Consider ROTH conversions during tax years 2025-2028.
Delay IRA or 401K distributions to keep income within the phase-out range.
Fact of the Month
Ida M. Fuller was the 1st recipient of Social Security. She paid in $24.75 and received $23K!
Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. This communication is strictly intended for individuals residing in the states of MI, IN, OH. Cambridge and Foundation Wealth Management are not affiliated.
