During Trump’s campaign, he promised that he will remove all taxes on the Social Security Benefits in the next tax bill. But when the U.S. President Donald Trump introduced a new tax bill called the “Big Beautiful Bill“, the promise is not included.
What retirees should know
Many people think that, the Social Security benefits are full tax-free. But it is very important to know that, this is not true. The fact is, if you are earning more than the tax limit, your Social Security benefits is also taxable.
Your IRS will calculate that, how much of the benefits will be taxable by combined income. The half of your Social Security benefits, your total earnings and the tax free interests are included in this.
You have to pay your taxes on your Social Security Benefits, if your combined income is above the limits:
- $25,000: For the single people
- $32,000: For the married couples
Please note that, if your combined income is more than $34,000 for the single person, and $44,000 for the married couples, the 85% of your benefits can be taxable according to IRS.
Why there is no Tax Cut in the Bill?
Trump promised that, he will remove the taxes on Social Security Benefits, but it is not present in the tax bill introduced. The rule called “Byrd Rule“, can be the reason behind it. It hard to change the tax bill because of that rule.
The cost can be another reason for this. Suppose, the government withdraw the taxes on Social Security benefits. This will cost nearly about $1.5 trillion for the next 10 years. And this will be the reason behind Social Security Crisis. According to some expert the trust fund can run out of money by 2034.
A New Deduction for seniors
On the one hand the taxes on Social Security benefits is still there, but on the other hand there is a bonus standard deduction for the seniors. This will save a little extra money for the seniors age 65 or more.
Now the single seniors will be able to get an extra $6,000 off in their taxes, and for the married seniors the amount is $12,000. The decoction will be beneficial for seniors. The deduction is for those, whose income is up to:
- $75,000: For single person
- $150,000: For married person
How the New Deductions will be helpful
- For lower-income retirees: In this category, the new deduction will not be helpful. Because these people do not pay taxes on their Social Security Benefits.
- For middle-income retirees: For this category, the deduction will lower their income so they do no have to pay taxes to their Social Security Benefits.
- For higher-income retirees: If you fall in this category, you will not be able to save taxes because your income is above the limit. So you have to pay taxes on your Social Security Benefits.
The bonus deduction will be helpful for some seniors. And this deduction will cost the government much less than removing all taxes on Social Security benefits. The bonus deduction will cost hardly $200 billion over the 10 years.
The Social Security’s future is still uncertain. Some expert think that the fund will be run out of money by 2034, and the government will have to think in a different way.
The new tax bill fails to keep the promise, but it decently introduced a new deduction that will help many seniors, mostly those with lower to middle incomes. The sad part is, this will not be beneficial for everyone in this country.
For more information, please visit the official website of Social Security Administration (SSA).
