Email from SSA

[kathyc2]

Includes:  "The new law includes a provision that eliminates federal income taxes on Social Security benefits for most beneficiaries, providing relief to individuals and couples. Additionally, it provides an enhanced deduction for taxpayers aged 65 and older, ensuring that retirees can keep more of what they have earned."

Bad enough that we need to dispel the  "somebody said" and FB garbage, now it's coming direct from federal agency.  Shameful. 

 

[kathyc2]

11 minutes ago, Lee B said:

 

What's worse is that the benefit is received by middle and upper income senior taxpayers .

Lower income senior citizens receive no benefit.

Phaseout of the add'l 6K starts at 75K for S and HOH and 150K for MFJ.

I have several clients that I give an amount to each year how much they can convert from Trad to Roth free of tax.  I'm going to need to recalculate and contact those clients so they don't think they can just add the 6K amount and still pay zero FIT. 

[Lee B]

Garnishment for up to 50 % of their benefits will begin on July 24th for more than One Million Social Security recipients.

[BulldogTom]

I am a little confused about what I am reading.   I think what it says is if you are:

1. Over 65
2. Income below 75K S / 150K MFJ

You get an additional 6K standard deduction.

My Questions:

1. Do both spouses have to be over 65?  
2. Do both spouses get 6K?
3. Does this affect the additional over 65 Std Deduction?
4. How does the phaseout work?  Is it a cliff?   What is the basis for phaseout income?   MAGI?

I am sure I will get all my answers when I do my CPE in Nov.

Tom
Longview, TX

[kathyc2]

“(C) DEDUCTION FOR SENIORS.—

“(i) IN GENERAL.—In the case of a taxable year beginning before January 1, 2029, there shall be allowed a deduction in an amount equal to $6,000 for each qualified individual with respect to the taxpayer.

“(ii) QUALIFIED INDIVIDUAL.—For purposes of clause (i), the term ‘qualified individual’ means—

“(I) the taxpayer, if the taxpayer has attained age 65 before the close of the taxable year, and

“(II) in the case of a joint return, the taxpayer's spouse, if such spouse has attained age 65 before the close of the taxable year.

“(iii) LIMITATION BASED ON MODIFIED ADJUSTED GROSS INCOME.—

“(I) IN GENERAL.—In the case of any taxpayer for any taxable year, the $6,000 amount in clause (i) shall be reduced (but not below zero) by 6 percent of so much of the taxpayer's modified adjusted gross income as exceeds $75,000 ($150,000 in the case of a joint return).

“(II) MODIFIED ADJUSTED GROSS INCOME.—For purposes of this clause, the term ‘modified adjusted gross income’ means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933.

[kathyc2]

It doesn't change the standard deduction, as it's a separate line item.  Also available to those that itemize.

[Abby Normal]

1 hour ago, Lee B said:

Garnishment for up to 50 % of their benefits will begin on July 24th for more than One Million Social Security recipients.

Some people are going to be in for a world of hurt. 

[Lee B]

Different analyses that I have read say that it reduces the percentage of seniors who will pay taxes on their social security benefits from about 40 % down to about 12 %.

The same analyses say that the social security trust surplus will be gone in 7 years (2032) since taxes on social security benefits are dedicated to the trust fund

[Catherine]

Garnishment is for those who have been overpaid - and there are several ways to get it waived or the payback rate lowered.

https://www.fool.com/retirement/2025/07/04/social-security-garnishment-begin-july-24-avoid-it/

As for those who are delinquent on student loans, either cancel them all, or everyone has to pay them back. Picking & choosing winners & losers (who skates & who pays) sets up anger on all sides at all sides. 

[kathyc2]

1 hour ago, Lee B said:

Different analyses that I have read say that it reduces the percentage of seniors who will pay taxes on their social security benefits from about 40 % down to about 12 %.

The same analyses say that the social security trust surplus will be gone in 7 years (2032) since taxes on social security benefits are dedicated to the trust fund

Seriously wish people would stop equating the 6K deduction to taxes on SS benefits.

1.  People who are age 65 but not drawing benefits get the deduction.

2. People under 65 with benefits will see no change.

3. Taxable income is taxable income.  You could just as easy say they are receiving 6K of interest tax free. Or, 6K of wages.  Or any other line item that makes up taxable income. 

4.  If it is reducing SS taxation, then it would have needed to be set up the the only way a person receives it is if there is taxable SS benefits and age would not matter.  

 

 

[Lee B]

I see what you are saying but I disagree because this deduction will reduce the taxes paid on social security benefits which are dedicated to the Social Security Trust Fund.

[kathyc2]

2 minutes ago, Lee B said:

I see what you are saying but I disagree because this deduction will reduce the taxes paid on social security benefits which are dedicated to the Social Security Trust Fund.

I don't think it will.  If that were true they would have needed to change the code section that authorizes payment from general fund to trust fund and the formula used.  

[Lee B]

30 minutes ago, kathyc2 said:

I don't think it will.  If that were true they would have needed to change the code section that authorizes payment from general fund to trust fund and the formula used.  

The Committee For a Responsible Federal Budget and a number of other analyses that I have read say otherwise.

 https://www.crfb.org/blogs/obbba-would-accelerate-social-security-medicare-insolvency

"However, OBBBA would impact Social Security and Medicare indirectly, mainly by reducing the revenue collected from the income taxation of Social Security benefits, which is deposited into the Social Security and Medicare trust funds.1"

[kathyc2]

I think a lot depends on how they calculate the amount of "tax" on benefits that goes back to trust funds.  That seems to be a well guarded secret. 

Example age 65+ with 30K SS and 50K other income taxed at regular rates.  Max 85% or 25,500 falls into taxable column.  

Taxable income w/ std is 58.5K as is or 52.5K with add'l 6K.  Either way it's in 22% marginal bracket, although w/ add'l 6K tax will decrease it by 1,320.  

If they take the taxable amount of 25.5K times 22% it's not going to change. if they do some kind of proration (which I doubt) it will go down some.

I don't have a lot of faith in an organization that makes a statement like this: "Under current law, Social Security benefits are 50 percent taxable for seniors with over $25,000 ($32,000 for couples) of annual income, and 85 percent taxable for seniors with over $34,000 ($44,000 for couples) of income. That 50 percent is deposited into the Social Security trust fund, and the additional 35 percent into Medicare’s Hospital Insurance (HI) trust fund."