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Wealth Planning Commentary

Wealth Planning Commentary – June 9, 2025

June 9, 2025 by Mallon FitzPatrick, CFP®, CLU®, AEP®, Head of Wealth Planning

Demystifying Proposed Social Security Tax Relief

A provision in the 'Big Beautiful Bill' that many associate with tax-free Social Security benefits is in the news cycle and confusing taxpayers.

The proposed legislation, currently under revision in the Senate, does NOT mention tax-free Social Security. However, it does include an adjustment to a long-standing senior deduction. The bill introduces an additional $2,000 senior tax deduction for individual taxpayers aged 65 and over.

Those aged 65 and over already benefit from a deduction above the standard amount. The current senior deduction is approximately $2,000 per qualifying individual. The proposed bill effectively raises this senior deduction from $2,000 to $4,000 per eligible individual.

This increased deduction in the “Big, Beautiful Bill” has restrictions. The benefit begins to phase out for married couples when their modified adjusted gross income exceeds $150,000. Furthermore, the enhanced deduction is scheduled to expire after 2028.

Notably, the proposed legislation does not explicitly link the increase in the senior deduction to the taxation of Social Security benefits. Looking at math, many senior couples who receive Social Security and make less than $150,000 are already paying minimal federal taxes today. The proposed increased deduction may further reduce the income tax liability for millions of senior households, potentially bringing their taxable income close to zero, if it isn't there already.

However, characterizations of this specific, temporary, and income-restricted deduction as making Social Security benefits “tax-free” are inaccurate. As always, the provisions in the proposed legislation are subject to change pending further Congressional modifications.

Please reach out to your Wealth Manager with questions.

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