For months, President Donald Trump has made his plan for no taxes on Social Security benefits known to the public, both on the campaign trail and in office. Now, a budget bill, backed by the president and currently under consideration in the House, contains language about a “bonus.”
The bonus is a tax deduction for seniors. Currently, about 74 million people are on Social Security, according to the Social Security Administration, and nearly 57 million are age 65 or older.
Under the House measure that President Trump has dubbed “one big, beautiful bill,” recipients who are 65 and older would receive a $4,000 deduction, or bonus, on their taxes.
Who would be eligible?
Seniors who take the standard deduction or itemize their returns would both be eligible for the new deduction. It would reduce the taxable income for seniors, but it is not the same as a tax credit, which is a reduction in taxes owed, dollar for dollar. Also, the deduction has income-based restrictions, meaning the deduction decreases for any recipient who has income above $75,000, or for married couples, $150,000.
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There are currently about 74 million people receiving Social Security or supplemental security income, with nearly 57 million age 65 and older.
Howard Gleckman of the Urban-Brookings Tax Policy Center ran some numbers for CNBC and found that a retiree whose income is about $50,000 a year would see their taxes cut by $500 a year with this new bonus factored in. He said the bonus wouldn’t exactly be life-changing.
By contrast, eliminating taxes on Social Security benefits would have been a much larger number. Still, White House assistant press secretary Elizabeth Huston said that the deduction is a “historic tax break… fulfilling President Trump’s campaign promise to deliver much-needed tax relief to our seniors.”
Currently, beneficiaries pay taxes on 85% of Social Security money received if they have more than $44,000 of income and are married filing jointly. That number is $34,000 for individual filers.
The formula lowers to 50% of benefits for married couples earning between $32,000 and $44,000, or individual recipients in the $25,000 to $34,000 range.
How long would this bonus or deduction last?
While the deduction is billed as “historic,” the bill’s $4,000 deduction proposal is short-term. It would apply to tax years 2025 through 2028. It has been slated to expire when the Trump administration ends.
