One Big Beautiful Bill: How the New Senior Deduction Reduces Social Security Taxation

Overview of the New Senior Deduction

A new senior deduction introduced by the One Big Beautiful Bill (OBBBA) gives taxpayers age 65 and older an additional deduction of up to $6,000 (or $12,000 if both spouses qualify and file jointly) for tax years 2025–2028. This Senior Social Security Tax Deduction phases out based on Modified Adjusted Gross Income (MAGI) at a rate of 6% of the excess over the phaseout threshold and is fully eliminated at higher MAGI caps. This deduction reduces taxable income and can reduce how much of a retiree’s Social Security benefits become taxable.

Taxpayers age 65 or older may claim an additional deduction of $6,000 for 2025–2028. Married couples where both spouses are age 65+ may together claim up to $12,000. The deduction is available whether you claim the standard deduction or itemize.

Phaseout Rules for the Senior Deduction

The deduction begins to phase out once a taxpayer’s MAGI exceeds:

• $75,000 for single filers

• $150,000 for married filing jointly

The phaseout reduces the deduction by 6% of the amount of MAGI above the applicable threshold.

Phaseout examples:

• Single filers: Deduction is reduced by $60 per $1,000 and fully phases out at $175,000 MAGI.

• Married couples filing jointly: Deduction reduces by 6% of MAGI above $150,000 and fully phases out at $250,000.

• If married filing jointly, the phased-out deduction is split evenly between each spouse.

Why This Matters for Social Security Taxation

The taxation of Social Security benefits depends on your “provisional income” (AGI + tax‑exempt interest + half of Social Security benefits).

The new Senior Social Security Tax Deduction lowers taxable income, which reduces AGI and MAGI. Lower provisional income can move taxpayers below thresholds that trigger 50% or 85% taxation, or reduce the taxable portion.

How Social Security Taxation Works

For single filers:

• Below $25,000: No tax

• $25,000–$34,000: Up to 50% taxable

• Above $34,000: Up to 85% taxable

For married filing jointly:

• Below $32,000: No tax

• $32,000–$44,000: Up to 50% taxable

• Above $44,000: Up to 85% taxable

Examples of How the Deduction Reduces Taxes

Example A: Single Retiree

• Social Security benefits: $24,000

• Other taxable income: $18,000

• Provisional income before deduction: $30,000 (some SS taxable)

  
  

With the full $6,000 senior deduction, AGI drops to $12,000.New provisional income: $24,000 → Social Security becomes completely non‑taxable.

Example B: Married Couple

• Social Security benefits: $40,000

• Other taxable income: $110,000

• MAGI: $110,000

  
  

They qualify for the full $12,000 senior deduction.AGI reduces to $98,000, lowering provisional income to $118,000 and reducing their total tax liability.

Example C: Married Couple With Phaseout

• Social Security benefits: $30,000

• Other taxable income: $180,000

• MAGI: $180,000 (exceeds threshold by $30,000)

  
  

Reduction per spouse: 6% × $30,000 = $1,800Each spouse receives a $4,200 deduction, for a total of $8,400.

This reduces AGI and provisional income, lowering total taxes owed.

Key Takeaway

The new Senior Social Security Tax Deduction is a meaningful, temporary planning tool for taxpayers age 65 and older. For many low- and moderate-income retirees, it will reduce or eliminate taxes on Social Security. For higher-income retirees, it phases out gradually and ends entirely at $175,000 MAGI for singles and $250,000 for joint filers.

This deduction creates valuable tax planning opportunities from 2025 through 2028, and we plan to make the most of it while the legislation is in effect.