How the federal budget bill impacts those on Social Security

MINNEAPOLIS — The legislation that President Trump calls the “Big, Beautiful Bill” includes an additional tax deduction for seniors 65 and older. While it doesn’t end taxes on Social Security, it provides benefits for some people who receive income from the entitlement program. 

We turned to Steve Warren, a Twin Cities-based Certified Public Accountant, to help make sense of the new, temporary deduction.

“There’s no specific deduction or tax credit for people on Social Security. However, there’s a new tax benefit. It’s a deduction of up to $6,000 for people ages 65 and over from 2025 through 2028,” Warren said.

Seniors who make up to $75,000 per year as individuals or $150,000 as married couples can receive the full deduction. However, after that income level, the benefit phases out gradually, ending at $175,000 per year for single filers or $250,000 for couples.

“It’s your middle-income person who is going to benefit. Your lower-income person is already not paying tax at all, especially on your Social Security benefits,” Warren said. “Then, the higher-income people, this doesn’t matter because it’s going to be past the phase-out.”

In an email last week to millions of Americans, the Social Security Administration said the new law “includes a provision that eliminates federal income taxes on Social Security benefits for most beneficiaries.” However, the wording of the email drew criticism from some, including Howard Gleckman with the Urban-Brookings Tax Policy Center, who called the email “deeply misleading.”

“Anybody, whether you’re a Social Security beneficiary or not, that’s 65 or older, would be allowed to take a bigger standard deduction than they currently can,” Gleckman said. “That would reduce their taxes, including indirectly some of their Social Security taxes, but for the vast majority, it wouldn’t eliminate them. And for many, many Social Security recipients, it wouldn’t help them at all.”