One of the biggest complaints retirees have about Social Security is that they can end up paying taxes on the very benefits they spent decades funding through payroll taxes.
While not everyone owes federal taxes on Social Security benefits, millions of retirees do once their combined income exceeds certain thresholds. Those income limits haven’t been adjusted for inflation in decades, which means more retirees have gradually become subject to taxes on their benefits over time.
During his most recent campaign, President Trump pledged to eliminate federal taxes on Social Security benefits. And while he ultimately did not manage to do away with taxes on benefits permanently, he largely got rid of them temporarily in his One Big Beautiful Bill Act (OBBBA).
But that reprieve will only be around for so long. And some Social Security recipients may need to brace for taxes on benefits once a big OBBBA perk expires.
A temporary tax break for millions of retirees
The OBBBA introduced a number of tax changes, including a new $6,000 federal tax deduction for eligible taxpayers age 65 and older. Married couples where both spouses qualify can claim up to $12,000.
The deduction is available regardless of whether someone receives Social Security benefits. But for many retirees, it effectively offsets the taxes they would otherwise owe on those benefits.
The deduction begins to phase out for individuals with modified adjusted gross income above $75,000, or $150,000 for married couples filing jointly. But for many middle-income households, it’s huge.
The $6,000 senior deduction fulfills much of Trump’s promise to provide tax relief for retirees on Social Security without eliminating benefit taxation altogether. The White House reported last year that an estimated 88% of Social Security recipients wouldn’t owe taxes on their benefits thanks to the new $6,000 deduction.
There’s an end date to keep in mind
If you once owed taxes on your Social Security benefits and you don’t right now, you may be enjoying that financial boost. But don’t get too used to it.
The $6,000 senior deduction is set to expire after the 2028 tax year unless Congress votes to extend it. This means that come 2029, you may be looking at owing taxes on your Social Security benefits once again.
One big misconception about the OBBBA is that it got rid of taxes on Social Security income permanently. It’s important to realize that in just a few years, many seniors could owe those taxes again.
This especially holds true because the income thresholds that determine taxation are not adjusted for inflation, but benefits are. Each year, Social Security is eligible for a cost-of-living adjustment (COLA). As COLAs raise benefits, more seniors are likely to owe taxes on those monthly checks over time, since Social Security benefit payments go into the formula that determines whether those taxes apply.
Taxes on benefits can generate revenue for Social Security. For this reason, lawmakers aren’t in a hurry to get rid of them. But that could leave many seniors in the lurch come 2029.
Of course, lawmakers may decide to make the $6,000 senior deduction permanent before its expiration date. But that’s not something to count on. If you’re someone who benefits from that deduction today, keep an eye on future legislation so you’re not caught off guard.
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