How the OBBBA changes the taxation of Social Security benefits

If your clients rely on Social Security, you need to understand how the One Big Beautiful Bill Act’s (OBBBA) senior deduction can impact the taxation of the benefits. This change opens the door to smarter planning, bigger savings and better outcomes for older taxpayers.

Below, you’ll find a few of the top questions from a recent webinar on the topic and their corresponding answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.

Q: Are Social Security benefits taxable?

A: Yes. Depending on the taxpayer’s filing status and income, statutory base amounts exist, over which benefits may be taxable at 0%, 50% or 85%. The base amount for individuals who are single, head of household or qualifying surviving spouse is $25,000, where up to 50% is taxable between $25,000 - $34,000 and up to 85% over $34,000. For MFJ taxpayers, the base amount is $32,000, where benefits are 50% taxable between $32,000 and $44,000, and up to 85% taxable over $44,000. No taxpayer will have more than 85% of their Social Security benefits included in taxable income, regardless of income level.

Q: What is the senior deduction, and how does it affect taxes?

A: The senior deduction is a temporary increased standard deduction for taxpayers age 65 or older of $6,000 per individual available for tax years 2025-2028. It is available to taxpayers of that age regardless of whether or not they receive Social Security benefits. Income limits the ability to take the senior deduction as it starts phasing out at the rate of 6% per $1,000 over the following thresholds:

• Single: $75,000 to $175,000
• Married filing jointly: $150,000 to $250,000

Married couples must file jointly to qualify for the deduction; MFS filing status is not eligible for the deduction at all.

Q: Is a Social Security number needed to qualify for the senior deduction, or can an individual qualify if they have an individual taxpayer identification number (ITIN)?

A: A taxpayer must have a work-authorized Social Security number (SSN) to claim the $6,000 senior deduction established by Section 70103 of Public Law 119-21, the One Big Beautiful Bill Act.

Q: What is provisional income?

A: Provisional income is the income applied to the Social Security thresholds to determine the taxability of the benefits:

• Adjusted gross income (excluding Social Security)
• Tax-exempt interest
• 50% of Social Security benefits

The result is then compared to statutory base amounts to determine whether any portion of the benefits is taxable.