Social Security Agency Misleads Beneficiaries
(Advocates scramble to clarify tax implications of new law)
The Social Security Administration (SSA) distributed a misleading email last week concerning the implications of the Republican budget bill recently signed into law by President Donald Trump. Now, advocates are working to clarify the record.
Key Development
The SSA sent an email on July 3 stating the new law eliminates federal income taxes on Social Security benefits for most beneficiaries, affecting nearly 90% of recipients. However, that provision was removed because it violated Senate rules.
Instead, Americans aged 65 or older can take an additional $6,000 income tax deduction. The agency updated its press release on Monday to reflect this after media coverage and public outcry. Those aged 62 to 64 are not included.
The National Committee to Preserve Social Security and Medicare, a non-profit advocating for the program, believes the difference could confuse beneficiaries. They also claim the email’s political tone is unprecedented for the SSA.
SSA did not immediately respond to requests for comment.
Senior Deduction Details
The law allows Americans aged 65 and older to deduct an additional $6,000 on their federal income taxes, along with the standard deduction. Married couples can deduct $12,000 if both spouses are over 65. These tax deductions are set to expire after the 2028 tax season.
The deduction applies to those earning a modified adjusted gross income up to $75,000, or $150,000 for married couples. It phases out for incomes above that threshold and is unavailable to individuals earning $175,000, or couples earning $250,000.
The White House stated this provision will increase the share of seniors receiving Social Security who will not pay income tax on their benefits from 64% to 88%.
According to the Census Bureau, in 2023, roughly 40% of Social Security recipients aged 65 and older paid federal income taxes on their benefits (U.S. Census Bureau).
Upper-middle-class seniors stand to benefit most, not the poorest (who already don’t pay) nor the richest (due to the income phaseout). Those with incomes below $63,300 pay about 1% or less of their benefits, on average, in taxes, according to the Center on Budget and Policy Priorities.
Future Implications
The Committee for a Responsible Federal Budget (CRFB) estimates the provision would bring the trust fund to insolvency one year sooner than current calculations. Once that happens, Social Security beneficiaries would face an across-the-board benefit cut of around 24%, CRFB says.
Other provisions in the bill are also expected to disproportionately affect older Americans. For example, it changes eligibility for and cuts federal funding for the Supplemental Nutrition Assistance Program (SNAP) starting in 2027, which 11 million adults aged 50 and older rely on, according to AARP. New work requirements on Medicaid could also prevent some older Americans from receiving benefits.
Since Trump’s inauguration, Social Security has become a point of controversy. The agency was a target of the administration’s so-called Department of Government Efficiency under Elon Musk, which has worried advocates who say it is becoming overly-politicized.
