Social Security is a crucial source of income for many seniors, so understanding the details of how these benefits work is important. That’s especially true when changes are made. For example, the One Big Beautiful Bill Act was passed recently, and there have been claims that this Act eliminated taxes on Social Security.
Finance guru Suze Orman says that’s not the case, though. Orman addressed the rule change on her Women & Money podcast, and she wanted to make a few things clear regarding the truth about taxation of Social Security benefits after the law change.
Suze Orman said this is the reality of taxes on Social Security
Suze Orman was very clear about one key issue. Claims that taxes on Social Security benefits have been eliminated are not true.
“The rules on taxation of Social Security benefits were not changed. Do you hear me? No changes to Social Security,” she said.
Before the passage of the One Big Beautiful Bill Act, retirees started to get hit with tax on part of their Social Security benefits after their provisional income hit a specific threshold. That threshold is $25,000 for single tax filers and $32,000 for married joint tax filers.
The income that’s counted in provisional income for determining if you meet the threshold includes a limited amount of non-taxable income (like MUNI bond interest), all your taxable income, and half your Social Security.
That limit has not changed. As Orman explained, some taxes on benefits have applied since 1983, although there were some modifications to the rules in 1993. However, the One Big Beautiful Bill did not alter these thresholds, which have not been adjusted for inflation for decades.
A rule change does mean fewer retirees will pay taxes on Social Security benefits
While Orman explained that no official changes to Social Security’s tax rules have been made, she also acknowledged that fewer retirees may get stuck paying those taxes. That’s because other parts of the tax code were changed.
Specifically, some seniors 65 and over have now become eligible for a new $6,000 deduction. And, married couples where both spouses are 65 or over are eligible to get a deduction of up to $12,000 between the two of them.
This is separate from and in addition to existing deductions for seniors that were already in place, including one allowing a $2,000 deduction for older singles and a $1,600 deduction for each married partner who files a joint return.
While this new $6,000 deduction is available to many of the same people who claim Social Security, it is not directly linked in any way to the Social Security benefits program. Orman wanted seniors to be very clear on that, because the tax deduction is not limited to people collecting retirement benefits.
“You are eligible for it even if you have yet to start claiming Social Security,” Orman explained, referring to the new tax break. ‘There is no link between the new tax break and Social Security.”
The deduction does come with income limits, though, and it starts to phase out for singles with $75,000 or more in income, or married joint filers with $150,000 in combined income. And it is a temporary one, with seniors only able to claim the new $6,000 deduction through 2028.
So, while the deduction will help to reduce the overall tax bill for seniors, the fact remains that Social Security benefits are still taxable and that even this temporary reprieve from a big IRS bill won’t be permanent.
While retirees may be disappointed to find out they are still getting taxed on Social Security, seniors do need to make sure they understand how the changes to the tax code under the Big Beautiful Bill could affect their finances next year.
A financial advisor can provide advice on this issue and help retirees ensure they get the tax savings they are entitled to receive.
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