The recently enacted “One Big Beautiful Bill” has stirred discussions about its impact on taxes related to Social Security benefits. While the legislation introduces a tax deduction of up to $6,000 for eligible seniors, it does not fully eliminate taxes on Social Security benefits, as some might have expected.
This new tax deduction is an additional benefit that is geared towards seniors aged 65 and older, aiming to alleviate their tax burden. According to the bill, 88% of seniors who receive Social Security will no longer pay taxes on their benefits, up from 64% prior to its passage, according to estimates from the President’s Council of Economic Advisers.
However, experts have cautioned that the promise of eradicating taxes on Social Security benefits is misleading. Due to certain restrictions within budget reconciliation legislation, complete elimination of such taxes remains unfeasible. In essence, while the Big Beautiful Bill enhances senior tax deductions, those earning above specified thresholds will see a gradual decrease in their deductions, culminating in a loss of benefits altogether for higher-income individuals.
Specifically, the complete $6,000 deduction is accessible for single filers with combined incomes under $75,000, and $150,000 for joint filers, tapering to zero as income approaches $175,000 for individuals and $250,000 for couples. Analysts from the Tax Foundation have warned that many seniors could find themselves ineligible despite high hopes for tax relief.
Additionally, seniors seeking assistance with their tax filings can utilize various resources, including Tax Help Utah, which offers free tax preparation, as well as the IRS’s Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs. These services can help navigate the complexities of tax preparation and ensure that seniors are receiving the benefits they may qualify for.
In a positive light, while the bill may not eliminate taxes on Social Security benefits completely, the increased tax deduction represents a step toward lightening the load for many seniors. It’s essential for seniors to stay informed about eligibility requirements to maximize the benefits applicable to them.