The latest version of the GOP’s “big, beautiful bill,” which passed both houses of Congress this week and is headed to President Trump for his signature on Friday, includes a $6,000 tax deduction for Americans 65 or older.
The provision does not entirely end taxes on Social Security, but it would zero out the Social Security tax burden for 88 percent of seniors, according to an estimate by President Trump’s Council of Economic Advisers.
That’s up from 64 percent of seniors who are currently exempt from Social Security taxes, meaning about 14 million additional seniors will benefit from the change.
Trump’s megabill would offer a tax deduction of $6,000 to seniors making up to $75,000 individually, or $150,000 on a joint return. The deduction is lowered for incomes above that level, and phased out altogether for seniors with individual incomes of more than $175,000, or $250,000 jointly.
Seniors can currently claim a standard deduction of $15,000 (or $30,000 for couples), plus an additional senior-specific deduction of $2,000 (or $3,600 for couples). The bill also raises the standard deduction by a few hundred dollars.
The median income for seniors in 2022 was about $30,000.
The new legislation is expected to provide limited benefits for lower-income seniors because they already pay less in taxes.
“While it may be pitched as going to low-income seniors, low-income seniors don’t pay taxes already,” Marc Goldwein of the Committee for a Responsible Federal Budget (CRFB) told The Washington Post.
Goldwein said the new deduction would be more meaningful for upper-middle-class seniors.
The new senior deduction also has implications for the federal fund that pays out Social Security benefits, which was already facing insolvency in the coming decade: Along with other changes to the program, the deduction could speed up the exhaustion of the Social Security trust fund by about a year, the CRFB estimated last week.
The final version of the bill, which is currently set to expire after 2028, could cost $91 billion over four years, according to the CRFB. An earlier House-passed version of the tax bill would have set the new senior deduction at $4,000, a $66 billion cost over four years.
It estimated that under the changes in the legislation Trump is expected to sign, the Social Security trust fund could be insolvent by 2032.
Currently, Social Security benefits are partially taxable, with revenue from those taxes going back into the fund.
The new deduction, in addition to the extension of the 2017 GOP-passed tax cuts and other changes in the megabill, would reduce the total taxation of benefits by about $30 billion annually, the advocacy group said.
The cost of the megabill was a major sticking point for some fiscal hawks in the House, many of whom thought the Senate would trim tax cuts first passed in the lower chamber, not ramp them up.
Rep. Andy Harris (R-Md.), chair of the ultraconservative House Freedom Caucus, and Rep. Ralph Norman (R-S.C.) were among those who had signaled their opposition.
However, they were up against a leadership team determined to push the bill through and a president who insisted he wanted it on his desk by Friday.
Updated on July 4 at 10:17 a.m. EDT
