For many retirees, Social Security is a vital part of their income, but understanding how it’s taxed can be confusing. Although a new law has changed the tax landscape for some seniors, it’s important to separate fact from fiction. Despite recent headlines suggesting that Social Security benefits are now tax-free, federal income tax may still apply.
Here’s what you need to know, especially in light of the One Big Beautiful Bill Act (OBBBA) signed into law on July 4, 2025.
When Are Social Security Benefits Taxable?
Whether your Social Security benefits are taxable depends on your combined income, which is calculated as:
Combined Income = Adjusted Gross Income (AGI) + Nontaxable Interest + 50% of Social Security Benefits
Based on your combined income and filing status, a portion of your benefits may be subject to federal income tax. For single, head of household, widow(er), and those who are married filing separately, the maximum combined income limit is $25,000 (0% tax). The limit is $32,000 if you are married filing jointly.
If your combined income exceeds the limits for your filing status, however, you may be required to pay taxes on 50% to 85% of any income above those thresholds.
Fifty percent of your Social Security benefits may be taxable if you are:
- Filing single, head of household, or qualifying widow(er) with $25,000 to $34,000 income
- Married filing separately and lived apart from your spouse for the entire tax year with $25,000 to $34,000 income
- Married filing jointly with $32,000 to $44,000 income
Up to 85% of your benefits may be taxable if you are:
- Filing single, head of household or qualifying widow(er) with more than $34,000 income
- Married filing jointly with more than $44,000 income
- Married filing separately and lived apart from your spouse for the entire tax year with more than $34,000 income
- Married filing separately and lived with your spouse at any time during the tax year
What Changed in 2025: The “One Big Beautiful Bill”
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act into law. Although it was widely promoted as ending taxes on Social Security benefits, the truth is a bit more nuanced.
What the Bill Actually Does
- Introduces a “Senior Bonus” deduction:
- $6,000 for single filers
- $12,000 for married couples
- Available for tax years 2025–2028
This deduction reduces your taxable income, which may reduce or eliminate the taxes you owe on Social Security benefits. It does not, however, repeal Social Security taxes outright.
Who Is Eligible for the New Deduction?
To claim the full deduction, you must meet all the following criteria:
| Requirement | Details |
| Age | You (or both spouses) must be 65 or older |
| Income Limits | Below $75,000 (single) or $150,000 (joint) AGI |
| Filing Type | Standard deduction or itemized return allowed |
If your income is above the phase-out threshold, the deduction is reduced proportionally and may be phased out entirely.
Example – How It Works
| Scenario | Income Details | Deductions | Resulting Tax |
| Single, 67, AGI=$60K | $24K Social Security + $36K other income | Standard + $6K senior deduction | Likely no tax on Social Security |
| Married both 65+, AGI=$130K | $48K Social Security + $82K other income | Standard + $12K senior deduction | Possibly zero tax on benefits |
| Couple, AGI=$160K | Above phase-out threshold | Deduction reduced/phase-out | Benefits may still be taxable |
Important Notes
- This is a temporary deduction, available only for tax years 2025–2028.
- It does not change the way the IRS calculates Social Security taxation. It simply helps lower your taxable income.
- If you’re already below the taxable income threshold for benefits, this deduction may not change your tax outcome.
Frequently Asked Questions (FAQ)
Q: Is Social Security income now tax-free for everyone?
A: No. Although some beneficiaries may pay no taxes due to the new deduction, Social Security is still subject to federal income tax for many recipients, depending on income.
Q: Do I need to do anything to claim the new senior deduction?
A: Yes. You must file a tax return for tax years 2025 through 2028 and claim the standard deduction (or itemize). The IRS will provide forms and guidance closer to the 2025 tax filing season.
Q: I’m on Social Security Disability (SSDI) and under 65. Do I qualify?
A: No. The deduction is only available for taxpayers age 65 and older during the tax year.
Q: Will my state tax Social Security benefits?
A: It depends on your state. As of 2025, 38 states do not tax Social Security benefits, but 12 states still do in some form. This new federal deduction does not apply to state taxes.
Q: Will the deduction be extended after 2028?
A: Possibly, but nothing is guaranteed. The current legislation sunsets after 2028 unless Congress takes further action.
Bottom Line
Although the One Big Beautiful Bill Act makes it easier for many seniors to avoid paying taxes on Social Security benefits, it does not eliminate those taxes entirely. For those who qualify, the Senior Bonus Deduction can make a significant difference, but eligibility and income thresholds matter.
To get the most out of this benefit, consult a tax professional to review how the deduction may affect your personal tax situation.