White House touts Social Security tax break as largest in history

Social Security is a program that tens of millions of older Americans rely on for income.

The fact of the matter is that many Americans struggle to save for retirement, either because their wages aren't high enough or they have too many competing priorities.

It's hard to set aside money in a 401(k) when you're barely covering the mortgage. And a lot of people figure they can retire mostly on Social Security, cut back on expenses, and manage okay even if they don't end up scraping together much savings.

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Still, many people end up with some income in retirement outside of Social Security. And people in that boat often lose out in the form of being taxed on their monthly benefits.

A recent change could get millions of older Americans out of those taxes. But a surprisingly large chunk of seniors could get left out.

White House touts Social Security tax break as largest in history

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People who retire on only Social Security can often get away with not paying taxes on those benefits.

But retiring on Social Security alone is tricky. The average monthly benefit today only pays about $2,000, which isn't enough to cover even a modest lifestyle.

For this reason, retirees often supplement their Social Security benefits with modest IRA withdrawals, a 401(k), or part-time work. But that can lead to an unwanted tax burden – federal taxes on Social Security benefits.

Social Security benefits are taxed based on a formula called combined income. It's calculated as:

50% of annual Social Security benefits
Adjusted gross income
Tax-free interest income

A combined income of over $25,000 for singles or $32,000 for married couples filing joint tax returns results in taxed benefits to some degree, taking critical income away from retirees who need it.

As part of his presidential campaign, Donald Trump pledged to do away with taxes on Social Security. It seemed like that promise wouldn't come to light until the One Big Beautiful Bill Act was passed.

Now, the White House is calling the bill “the largest tax break in history for America’s seniors.”

The bill provides a $6,000 bonus tax deduction for filers ages 65 or older. For a married couple filing jointly, that deduction doubles to $12,000.

In light of this, the White House claims that “the vast majority of senior citizens – 88% of all seniors who receive Social Security – will pay NO TAX on their Social Security benefits.”

And that may be true.

But seniors should recognize that the aforementioned deduction is technically not tied to Social Security directly. Not only that, but the bill does not make any changes to Social Security itself.

The new tax break also does not apply to all Social Security recipients.

Americans 65 and over are eligible for the new tax break. But seniors can file for Social Security benefits once they turn 62, albeit for reduced monthly payments. A good number of early filers therefore won't get the new benefit.

More on retirement:

Also, the bonus deduction sunsets in 2028. So while seniors on Social Security might get to enjoy a temporary tax break, whether it's truly the “largest tax break in history” may be up for debate.