No, Social Security Taxes Aren’t Gone. But Here’s What Actually Changed — and How to Use It

Greg Hier |
Categories
Retirement
Retirement Income
Social Security
Tax Planning

You’ve probably seen the headlines or heard the political ads: “Social Security is no longer taxable!”

It sounds amazing. It’s also misleading.

Let’s set the record straight.

Social Security benefits are still taxable in 2025 — and the outdated formula that determines how much is taxed hasn’t changed since the 1980s.

What has changed is a temporary deduction for seniors, part of the 2025 One Big Beautiful Bill Act. And yes, it can lower your tax bill. But it’s a workaround, not a fix.

Let’s walk through what actually changed, what didn’t, and how to make the most of it.

What Didn’t Change: The Social Security Tax Formula

Taxation of Social Security benefits started in the Reagan era and was increased under Clinton. And the formula is brutal:

If your provisional income (AGI + tax-exempt interest + 50% of SS) is:

  • $25K–$34K (single) or $32K–$44K (joint), up to 50% of your benefits may be taxed
  • Over $34K (single) or $44K (joint), up to 85% can be taxed

Those thresholds have never been adjusted for inflation. So every year, more retirees get pulled in.

And in 2025, that formula still stands.

What Did Change: The Senior Deduction

Instead of fixing the Social Security tax issue, Congress added a temporary above-the-line deduction:

  • $6,000 for single filers age 65+
  • $12,000 for joint filers if both are 65+

It’s available from 2025 through 2028. It stacks on top of the standard deduction. And it applies whether or not you’re collecting Social Security.

But here’s the key: it reduces taxable income, not the Social Security tax formula itself.

That means it can still lower how much of your SS is taxed, but only indirectly.

Real Numbers: Bob & Linda

Bob and Linda are 68 and retired and have:

  • $40K in Social Security income
  • $40K in IRA withdrawals

Without the senior deduction:

  • AGI = $59,600 (IRA withdrawals + Taxable SS)
  • Standard deduction = $32,200
  • Taxable income = $27,400
  • Estimated federal tax = ~$2,848

With the senior deduction:

  • Total deduction = $32,200 + $12,000 = $44,200
  • Taxable income = $15,400
  • Estimated federal tax = ~$1,540

Savings: $1,308

Not bad for a temporary deduction.

What It Means for You

If you’re over 65, you might see real tax relief in 2025. But don’t let the headlines fool you:

  • Social Security is still taxable and hasn’t changed
  • The Senior Deduction is temporary (2025–2028)
  • It phases out above $75K (single) or $150K (joint)
  • It’s not available if you’re under 65 (even if disabled)

Translation: this helps, but it’s not permanent or comprehensive and doesn’t apply to everyone.

Planning Moves to Consider

This deduction opens the door for smarter income strategies. Here's what we're helping clients do:

  • Utilize IRA withdrawals to fall within lower tax brackets
  • Draw down IRAs now to reduce RMDs later
  • Consider Roth conversions while taxes are temporarily lower
  • Delay Social Security for a higher benefit and less taxation (you can still qualify for the Senior Deduction without claiming SS)

The right plan could save thousands — if you act now before the Senior Deduction expires.

Bottom Line: Don’t Confuse Headlines With Strategy

Yes, your taxes may go down. No, that doesn’t mean Social Security is tax-free.

The government gave you a window. Smart planning turns it into a win.

If you want help making the most of the new Senior Deduction and building a retirement income plan that keeps your tax bill low and your income steady:
 

📞 Schedule your free no-obligation Retirement Income Diagnostic today: CLICK HERE

📍 Visit us: www.infinllc.com

📧 Email: info@infinllc.com | ☎️ Call: 512-538-6271
 

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