New deduction may lower seniors' Social Security tax burden

"Delorme noted in his post published by the Center for Retirement Research at Boston College that the expanded deduction increases the standard deduction to $23,750 for single filers and up to $46,700 for married couples filing jointly. The increase applies from 2025 through 2028. The taxable share of Social Security depends on combined income, which includes half of Social Security benefits, nontaxable interest and other taxable income."

"For some lower-income retirees, the change could eliminate federal income taxes entirely, although some were already exempt from Social Security taxes under existing rules. Delorme wrote that the provision doesn't explicitly remove federal taxes on Social Security, but it does have the same effect for many people. He gave an example of a single woman over 65 with $30,000 in pension income, $10,000 in investments and $24,000 in Social Security benefits. The new deduction potentially reduces her federal tax bill by $720."

An expanded deduction raises the standard deduction to $23,750 for single filers and up to $46,700 for joint filers from 2025 through 2028 for taxpayers aged 65 and older. The change effectively reduces taxable income by $6,000 per qualifying person and can eliminate federal income tax for some lower-income retirees. Combined income calculations that determine the taxable share of Social Security include half of benefits, nontaxable interest and other income; once combined income exceeds $44,000 for joint filers or $34,000 for singles, up to 85% of benefits are taxable. Actuaries estimate the provision moves the Social Security trust fund depletion about six months earlier, to early 2034. The benefit phases out beginning at $75,000 for single filers and $150,000 for joint filers.

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