By Retired Americans receiving Social Security income have faced major policy changes in 2024, from adjustments to the retirement age to changes in how the Social Security Administration handles overpayments. Now, a new proposal could offer a significant tax break on Social Security income—potentially saving retirees thousands in federal income taxes. Keep reading to learn more about the potential Social Security tax break that could mean a significant deduction for retirees. Plus, find out about eligibility requirements and how long this bonus could last.
A closer look at the possible Social Security tax break
On May 12, the House Ways and Means Committee released a nearly 400-page draft legislation focused on transforming U.S. economics. One of the highlights: a big bonus that could benefit millions of seniors.
The proposal, entitled “enhanced deductions for seniors,” explains the Social Security benefits that could impact older Americans, reports Newsweek.
What it involves: Americans aged 65 and older would be eligible for an additional $4,000 deduction on Social Security income during the 2025-2028 tax years. A deduction lowers your taxable income before calculating what tax you owe.
The only other caveat for eligibility besides age? Your adjusted gross income (AGI) must not be above the designated cap. This is $75,000 a year for single filers or a combined income of $150,000 for those who are married.
Those who can take advantage of the deduction would essentially see their taxes lowered even further, which is helpful for those who rely heavily on Social Security benefits. You would just need to be able to provide a valid Social Security number when filing.
What this proposed Social Security tax deduction means for you
As part of his campaign promise, President Donald Trump has been repeatedly pushing to eliminate taxes on Social Security, likely because up to 85 percent of benefits can be taxed. Nine states still collect taxes on benefits.
While there is no mention of a tax cut happening in the draft resolution, the potential deduction is meant to still provide some financial relief.
One of the benefits is that this deduction would be on top of the regular standard deduction, allowing seniors to maximize their tax break. It would also be available regardless of whether a person itemizes deductions, a financial expert told TheStreet.com.
The current standard deduction amounts for the 2025 tax year:
- Single: $15,000
- Married but filing separately: $15,000
- Head of household: $22,500
- Married and filing jointly: $33,000
A potential downside, however, is that the special deduction would not be indexed for inflation. This means that it would remain fixed at $4,000 for those four tax years.
When the proposed tax break could go into effect
Though the proposal seems promising, there are unfortunately no guarantees yet for the deduction. The bill could undergo some tweaks before it’s considered a final draft, which could potentially mean tweaks to anything from the deduction amount to eligibility.
Once the final bill has been written, it will need to win over the majority of the Republicans in the House of Representatives. After that, it must pass in the Senate. There are hopes from Republicans that the bill will reach the Senate by Memorial Day, with Trump signing the bill by Independence Day, reports Newsweek.
