Social Security Taxes and the “One Big Beautiful Bill”

Social Security Taxes and the “One Big Beautiful Bill”

President Trump’s One Big Beautiful Bill received final approval from the House & Senate and was signed on July 4, 2025. Many of the provisions will take effect starting in January 2026, while a number of components will be effective for 2025.

The OBBB permanently locks in the tax rates set under the Tax Cuts and Jobs Act (TCJA) in 2017. Those rates were set to expire at the end of 2025 but will now remain as-is.

One part of the OBBB that did not come into fruition was the elimination of taxes on Social Security benefits. While it was a part of Trump’s campaign, it proved more difficult to change for two reasons:

• Republicans in Congress used the reconciliation process to approve the OBBB changes. However, there are limits to what can be changed using reconciliation. To remove the taxes on Social Security, it would require changing the Social Security tax law. This requires a 60% majority vote in the Senate, but there was not enough support to get that required vote.
• The taxation of Social Security benefits is one of three revenue sources for the benefits program. It accounts for approximately 5% of the total funding. The taxes that Social Security recipients get diverted back into the program and fund benefits. They do not go to the Treasury for funding normal government operations. Removing these taxes would eliminate one of the program’s revenue sources and make existing shortfall issues even worse.

Since eliminating these taxes was not possible, the OBBB does create near-term tax relief for many seniors. It creates an additional $6,000 standard deduction for those over age 65. It is available for single filers with income under $75,000 and married filers with income under $150,000. The new deduction will phase out for individuals with higher incomes. Additionally, the new deduction is effective for the 2025 tax year and expires in 2029, so it provides additional tax savings for 4 tax years.

Taxes on Social Security are not going away and must continue to be reported for those who exceed the income requirements. However, many retirees will likely see cost savings over the next few years with the introduction of the new standard deductions.

As with any major tax bill, more information will roll out in the weeks ahead. We will continue sharing more details as they become available. If you have questions about how these changes may impact your Social Security and/or tax situation, please let us know. We’re happy to have those conversations!

Will Goodson, CFP®​​​​
Senior Financial Advisor
National Social Security Advisor (NSSA®)

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More relevant articles by Financial Synergies:

• Social Security Fairness Act: What You Need to Know [Video]
• The Social Security Fairness Act: Major Changes Explained [Video]
• Social Security Part 1: The Basics

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