00:00Do Social Security taxes disappear with Trump's reform?
00:04Despite claims from the White House and the Social Security Administration that the reform
00:09introduced by President Donald, Trump's Big Beautiful bill will lead to the elimination
00:15of federal income taxes on Social Security benefits for most beneficiaries experts widely
00:20agree that these taxes do not disappear.
00:24The White House stated that under the one big beautiful bill, 88% of all seniors receiving
00:30Social Security would pay nitrogen monoxide tax on their benefits, calling it the largest
00:37tax break in history for America's seniors.
00:40The SSA similarly claimed the legislation eliminates federal income taxes on Social Security benefits
00:48for most beneficiaries and that nearly 90% of beneficiaries would no longer pay these
00:53taxes.
00:55These figures were based on an analysis from the Council of Economic Advisers.
00:59However, policy experts describe these claims as misleading and not accurate.
01:05The legislation does not eliminate taxes on Social Security benefits.
01:10One key reason it was impossible to eliminate these taxes under the bill was a congressional
01:14restriction known as the Byrd Rule, which limits what can be included in a budget reconciliation
01:20bill.
01:21What the reform actually does?
01:23A temporary tax deduction.
01:26Instead of eliminating taxes, the reform introduces a new temporary additional tax deduction
01:32for beneficiaries.
01:34While the legislative tax referred to it as a bonus, it's technically a deduction that
01:38reduces the amount of income subject to taxes, not a direct payment or bonus check like
01:44those issued during COVID.
01:46Here are the key details of this temporary deduction.
01:49Amount eligible individuals aged 65 and older can claim a deduction of up to $6,000.
01:57And married couples where both are 65 or older can claim up to $12,000.
02:04Eligibility and income thresholds.
02:06It's only available for taxpayers 65 years or older.
02:11Beneficiaries under 65 are not eligible.
02:14The full deduction is available for single filers with a modified adjusted gross income of up to
02:20$75,000 for married couples filing jointly.
02:24The full deduction is available for a MAGI up to $150,000 phase out.
02:31The deduction gradually phases out for incomes above these thresholds.
02:35It is fully phased out for individuals making $175,000 and for couples making $250,000.
02:43Application.
02:44This deduction applies to a senior's total income.
02:48Not just social security benefits, it's an above-line deduction, meaning it's subtracted
02:54from gross income to calculate adjusted gross income, which can indirectly reduce tax
03:00liability on social security benefits.
03:03Crucially, this deduction is only set for tax years 2025 through 2028.
03:11This means that it will expire at the end of 2028.
03:15And beginning January 1, 2029, this specific tax relief will no longer be available.
03:21Who benefits and who doesn't?
03:23While some seniors may receive tax relief, the impact of this deduction is not universal.
03:29Middle-income seniors are projected to benefit the most.
03:33Specifically, those with incomes between $50,000 and $200,000 are estimated to see the most benefit.
03:41Low-income seniors who already pay no federal income tax on their benefits because their
03:47income is too low will not benefit from this deduction.
03:50As one expert noted, boosting the amount that you get to write off when you already get to
03:56write off everything does not help you at all.
03:59Those under 65 years old are ineligible.
04:02Individuals with incomes too high to qualify for the deduction or who are beyond the phase-out range will also not benefit.
04:10The Urban Brookings Tax Policy Center estimates that fewer than half of older adults will benefit from this senior deduction.
04:18Even for those who do benefit, the deduction aims to reduce rather than eliminate their taxes on benefits.
04:25They will simply see fewer taxes.
04:29Impact on Social Security funding experts.
04:32Also caution that despite the administration's claims of protecting Social Security, these provisions
04:38could actually weaken the program's financial state by reducing the tax revenue it receives.
04:43The additional senior deduction is estimated to reduce the taxation of Social Security.
04:49Benefits by approximately $30 billion per year.
04:54This could accelerate the projected insolvency date for the Social Security trust fund dedicated
04:59to retirement benefits to late 2032.
05:03Moving it up from the previously projected date of early 2033, the Penn Wharton budget model estimates
05:09that eliminating income taxes on Social Security benefits would lower federal revenue.
05:15By $1.5 trillion over 10 years and increase federal debt by 7% by 2054.
05:22Money Explainers
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