What you should know about the GOP megabill’s $6,000 “senior deduction.” The “big, beautiful bill” enacted by the Senate on Tuesday gives Americans 65 and over a $6,000 tax break.
According to an assessment by President Trump’s Council of Economic Advisers, the measure would eliminate the Social Security tax burden for 88% of seniors, although it would not completely eliminate taxes on Social Security.
The adjustment will benefit around 14 million more seniors, up from the 64 percent of seniors who are now free from Social Security taxes.
Seniors earning up to $75,000 individually or $150,000 on a combined return would be eligible for a $6,000 tax deduction under the version of Trump’s megabill that made it past the Senate. For seniors with individual earnings over $175,000, or $250,000 jointly, the deduction is reduced, and for those with incomes beyond that threshold, it is eliminated completely.
A basic deduction of $15,000 (or $30,000 for couples) and an extra senior-specific deduction of $2,000 (or $3,600 for couples) are now available to seniors. Additionally, the standard deduction would increase by several hundred dollars under the Senate measure.
In 2022, the typical senior income was around $30,000.
Since seniors with lesser incomes already pay less in taxes, it is anticipated that the new law would only offer modest advantages to them.
Marc Goldwein of the Committee for a Responsible Federal Budget (CRFB) said, “Even though it may be marketed as being for low-income seniors, low-income seniors already do not pay taxes.”
According to Goldwein, seniors in the upper middle class would find greater significance in the new deduction.
The government fund that distributes Social Security benefits, which was already in danger of becoming bankrupt in the ensuing ten years, will also be impacted by the new senior deduction: The CRFB calculated last week that the deduction, together with other program modifications, may accelerate the depletion of the Social Security trust fund by approximately one year.
The CRFB estimates that the Senate version, which is now scheduled to expire after 2028, may cost $91 billion over four years. The new senior deduction would be set at $4,000 under the House version of the tax package, which would cost $66 billion over four years.
It projected that the Social Security trust fund may become bankrupt by 2032 as a result of the Senate’s bill’s modifications.
Social Security payouts are currently subject to partial taxation, with the money collected from these taxes being reinvested in the program.
The advocacy organization claimed that the new deduction, along with other changes in the megabill and the renewal of the tax cuts approved by the GOP in 2017, would lower the overall taxation of benefits by around $30 billion yearly.
