Social Security tax breaks: What the ‘Big Beautiful Bill’ really means for 88% of retirees
Many people, such as President Donald Trump and many members of Congress, are excited about what they refer to as the “Big Beautiful Bill.” Others are not happy at all. Part of the problem is that while some parts of it can seem beautiful, they have meaningful drawbacks.
Consider Social Security. The White House issued a statement on July 1 saying that “Under the One Big Beautiful Bill, the vast majority of senior citizens — 88% of all seniors who receive Social Security — will pay NO TAX on their Social Security benefits, according to a brand new analysis from the Council of Economic Advisers.”
Here’s a look at whether you might be among the 88% — and whether you should be delighted about it. (Spoiler: You may want to put away the confetti and noisemakers.)
Taking a closer look at the ‘One Big Beautiful Bill’ on Social Security
So, having 88% of Social Security recipients exempt from taxation on their benefits sure sounds great. But here are some things to know:
- Per the same White House statement, 64% of seniors aged 65 and older who are collecting Social Security are already exempt from having their benefits taxed, due to various exemptions and deductions. So it’s not that this is a new exemption taking those who qualify from 0% to 88%. Instead, it’s just increasing the number of those who won’t face taxes on their Social Security benefits.
- That 88% figure is also short of the 100% implied by Trump in earlier promises, when he said things like “There’s also no tax on tips, no tax on Social Security, no tax on overtime … “
- To be clear, the bill does not eliminate taxes on Social Security. Instead, it creates a new deduction that will shrink the portion of benefits subject to federal taxation, in many cases shrinking it to zero.
- The deduction, for those who qualify, is $6,000 per person.
- It’s set to expire in 2028, at which point the percentage of seniors escaping this tax would presumably go back to around 64%.