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Was Income Tax on Social Security really eliminated? - USA Today
There has certainly been much discussion on this topic since the so-called “one big, beautiful bill” was passed by both Houses of Congress and enacted as law by President Trump. Many, including the Social Security Administration and the Trump Administration spokespersons, are hailing the bill as fulfilling the President’s promise to eliminate taxation of Social Security benefits. But does it really do that?
Well, technically no. Social Security law still mandates that received SS benefits over certain amounts are subject to income tax – as much as 85% of SS benefits for those with higher taxable income. And Social Security will still be issuing IRS form 1099 at year’s end detailing how much you received in SS benefits during the tax year, and you may be required to include that income when completing your federal income tax return. So, in that sense, nothing has changed when it comes to levying income tax on your Social Security benefits. So how is it that these spokespeople can make this claim?
Well, because the recent bill does, in fact, provide substantial tax relief for seniors by allowing a special increase (up to $6000) in the IRS’ Standard Deduction which, according to Administration pundits, will effectively offset any income tax most seniors must pay on their Social Security benefits. In other words, you may still pay income tax on your Social Security benefits, but you will get other tax relief which will likely offset the SS tax you must pay. Political slight of hand? Possibly, but it does create very attractive tax avoidance opportunities for those who must file income tax with the IRS, as described in this Yahoo! Finance article by Adam Levy.