Taxed. If you’re 65 and over you get up to an additional $6000 tax deduction when you file, expires in 2028. So when I start drawing social security next year at age 62 I don’t get the deduction. When I am 65 and eligible for the deduction it will have expired. I got really f**** over on this one.
The 2025 Act does not exempt Social Security benefits from taxation. In fact, the taxation of Social Security benefits hasn’t changed at all post-2025 Act—and, unfortunately, believing otherwise could prompt planning choices that end up increasing the amount of benefits subject to tax.
Back to Basics: How Social Security Benefits are Taxed
The taxation of Social Security benefits is very much dependent on a beneficiary’s “provisional income,” which is a combination of adjusted gross income (AGI), tax-exempt interest and half of the social security benefits [IRC Sec. 86]. Simply, the higher the income, the greater the federal income tax liability on Social Security benefits:
- For single filers with provisional income less than $25,000 and joint filers with provisional income less than $32,000, Social Security benefits are not subject to federal income tax.
- For single filers with provisional income between $25,000 and $34,000 and joint filers with provisional income between $32,000 and $44,000, up to 50% of their Social Security benefits could be taxed.
- For single filers with provisional income exceeding $34,000 and joint filers with provisional income exceeding $44,000, up to 85% of their Social Security benefits could be taxed.
Married taxpayers who file separate returns are subject to tax on their benefits without a $25,000/$32,000 floor.
Example: S has $20,000 in taxable dividends, $2,400 of tax-exempt interest, and Social Security benefits of $9,000. So, S’s income plus half S’s benefits is $26,900 ($20,000 plus $2,400 plus 1/2 of $9,000). S must include $950 of the benefits in gross income (1/2 ($26,900 − $25,000)).
Caution: If a Social Security beneficiary isn’t paying tax on their Social Security benefits now because their income is below the applicable floor or is paying tax on only 50% of those benefits, an unplanned increase in income can have a triple tax cost. The beneficiary:
(1) must pay tax on the additional income;
(2) must pay tax on (or on more of) their Social Security benefits (since the higher the income the more Social Security benefits that are taxed); and
(3) may get pushed into a higher marginal tax bracket.
This situation might arise, for example, when a beneficiary receives a large distribution from a retirement plan (such as an IRA) during the year or has large capital gains. Careful planning might be able to avoid this stiff tax result. For example, it may be possible to spread the additional income over more than one year, or liquidate assets other than an IRA account, such as stock showing only a small gain or stock whose gain can be offset by a capital loss on other shares.
New Temporary 65+ Deduction
The 2025 Act introduced a temporary senior deduction for tax years 2025–2028: individuals age 65 or older can claim $6,000 ($12,000 for joint filers), whether they itemize or not. Both spouses can qualify on a joint return. The deduction is reduced by 6% of any MAGI over $75,000 (single) or $150,000 (joint), and it is in addition to the regular standard deduction for seniors and the blind.
Notably, this new deduction is not directly related to Social Security benefits—whether a person aged 65+ receives Social Security benefits or not, they will still be eligible for the deduction. More specifically, the new deduction is a “below-the-line” deduction (i.e., taken after calculating AGI); thus, the deduction doesn’t impact the taxability of Social Security benefits (which is calculated in part using AGI).
For tax planning purposes, remember the new deduction is not linked to Social Security benefits, and the tax rules for those benefits remain unchanged after the 2025 Act. If seniors mistakenly think Social Security is now tax-free, they may make choices—like Roth conversions—that raise taxable income and increase the amount of Social Security benefits subject to tax. For example, converting $100,000 from a 401(k) to a Roth adds $100,000 to income, which can make more of their Social Security benefits taxable. Beneficiaries should understand that the new law does not change this outcome.
Conclusion
Despite widespread confusion, the 2025 Act did not eliminate federal income taxation on Social Security benefits. The longstanding rules governing the taxability of Social Security benefits remain unchanged. While 2025 Act introduced a new, temporary deduction for individuals 65 and older, this deduction is not specific to Social Security benefits. Clarity and careful planning are essential to avoid unintended tax consequences in the post-2025 Act landscape.
