Social Security: Trump's "Big, Beautiful Bill" Has Good and Bad News for Retirees
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President Trump's "One, Big, Beautiful Bill" passed through Congress last week and was signed into law on Friday, imposing sweeping new changes that will affect millions of Americans. The bill...
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personal finance
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July 9, 2025
06:00 PM
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President Trump's "One, Big, Beautiful Bill" passed through Congress last week and was signed into law on Friday, imposing sweeping new changes that will affect millions of Americans
The bill includes changes to Social Security, such as tax breaks that could seniors money
But there's a hidden downside that could hurt retirees down the road
Here's what you need to know how the new laws could affect your retirement
Image source: Getty Images
The good news: Tax savings for seniors During his campaign, Trump mised to eliminate federal taxes on Social Security benefits
While that measure was cut from the final bill, the majority of seniors are still set to receive a tax break
Beginning this year, those 65 and older can receive an additional $6,000 tax deduction (or $12,000 for married couples filing jointly) on top of the standard deduction
A report from the White House's Council of Economic Advisers claims that under the bill, "51. 4 million seniors -- 88% of all seniors receiving Social Security income -- will pay no tax on their Social Security. " While that wording is somewhat misleading (again, federal taxes have not been eliminated), the new deduction can reduce taxable income enough that the majority of seniors will not owe federal taxes
However, there are a couple of caveats
For one, this deduction is only temporary and is set to expire in tax year 2028
Second, there are income limits
The deduction phases out at $75,000 per year for individual filers and $150,000 per year for joint filers
It drops to zero at incomes of $175,000 per year and $250,000 per year
The bad news: This measure could hurt seniors in the coming years This deduction is not int to help seniors long-term
Once it expires in 2028, retirees can expect their tax bill to increase again
But even more worrying is the impact this tax cut might have on Social Security's trust funds
Social Security is funded primarily through income taxes
That includes payroll taxes paid by current workers and taxes on Social Security benefits themselves
However, the gram has been struggling with a cash shortage for years, as it's paid out more in benefits than it's received from taxes
As a result, the Social Security Administration (SSA) has needed to pull money from its trust funds to cover the deficit
According to the SSA's estimates from June 2025, the combined trust funds covering retirement and disability benefits are expected to be depleted by 2034
The report also revealed that if nothing changes between now and 2034, Social Security's income sources will only be enough to cover around 81% of scheduled benefits -- potentially resulting in benefit cuts of nearly 20%
Keep in mind that those estimates were done before the bill passed
While these tax deductions can vide temporary relief for retirees, they will also put more strain on Social Security's already struggling budget
With less income from taxes, the SSA will bably need to pull even more from the trust funds, causing them to run out faster than expected
Tax deductions are good news in the short term, but they could sting retirees in the coming decade
By staying aware of how this new tax measure will affect you, it will be easier to prepare your budget accordingly
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