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Many people, including President Donald Trump and many members of Congress, are excited about what they call “a big beautiful bill.” Others are not happy at all. Part of the problem is that while some of them may look beautiful, they have meaningful flaws.
Consider social security. The White House issued a statement on July 1, “under one big beautiful bill, the majority of seniors (88% of all seniors who received Social Security) will not pay taxes on Social Security benefits, according to a new analysis by the Council of Economic Advisors.”
Let’s see if you’re among the 88% and if you should be happy about it. (Spoiler: You might want to clean up confetti and noise maker.)
Read more about “One Big Beautiful Bill” on Social Security
So it certainly sounds fantastic that 88% of Social Security recipients are exempt from taxation on their benefits. But here are some things you need to know:
- According to the same White House statement, 64% of seniors over 65 collecting Social Security are already Various exemptions and deductions allow you to exempt from taxing benefits. So this is not a new exemption to bring people eligible from 0% to 88%. Instead, they are simply increasing the number of people who don’t face taxes on Social Security benefits.
- That 88% figure is nowhere near the 100% Trump had implied in his previous promise when he said, “Not any taxes, no social security taxes, or no overtime taxes.”
- To be clear, the bill does not rule out taxes on social security. Instead, they create a new deduction that reduces some of the profits that are subject to federal taxation. In many cases, it reduces it to zero.
- The deduction is $6,000 per person for eligible people.
- It is set to expire in 2028. At this point, the percentage of seniors who are escaping this tax will likely return to about 64%.
It is also worth noting that this is all related Federal Government Social Security benefits taxation. 9 states Social Security for Tax To some extent. But it is often done with light hands, and many people in those states will not pay taxes at all.
Who qualifies for the new tax credit deduction?
According to a version of the bill approved by the Senate on July 1, the tax credits for those over 65 years old and older will apply to people with individual adjusted gross income (MAGI) of up to $75,000, or married couples who submit in conjunction with MAGIs of up to $150,000.
The deduction will be reduced for those with income above these thresholds, and if their income reaches $175,000 for an individual, it will be $0 when a married couple has jointly filed it at $250,000.
What are the good and bad about the new low taxation?
On the surface, this seems like good news, even if that doesn’t apply to everyone. For many people Intention Getting a deduction is difficult to argue about reducing your tax payments.
However, these are as follows: The social security surplus turns into a deficit, and is estimated to be 2034. There is multiple ways to resolve the issue, so this unwelcome scenario doesn’t have to occur.
However, at this point, there has been relatively little talk of strengthening social security. Instead, it can be weaker – because if fewer older people pay taxes on their benefits, it means there is less money flowing into social security funds. This could cause the deficit appearance to move faster than in 2034, resulting in older people receiving less than 81% of their profits.
So, offering a tax deduction sounds good, but the whole picture is very worrying. As my colleague Adam Levy argued, what really seems to be happening is that Trump and Congress cannot protect Social Security.
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