OBBA and Social Security Taxes: What Seniors Need to Know

The One Big Beautiful Act (OBBA) has created a lot of buzz around the idea of “no taxes on Social Security.” But the truth is a little more complicated. While OBBA does provide some relief for older taxpayers, it’s not a full exemption from taxes on Social Security benefits. Let’s clear up the details.

The New Deduction Boost for Seniors

• Starting under OBBA, seniors aged 65 and older get an extra $6,000 added to their standard deduction.

  • For individuals 65+, that’s an additional $6,000.

  • For married couples where both spouses are 65+, it’s $12,000.

  This deduction is on top of the standard deduction that all taxpayers receive.

  But Here’s the Catch

  While this sounds like “no tax on Social Security,” that’s not really the case:

  • If you itemize deductions, you don’t get this extra amount — it only applies to the standard deduction.

  • If you have a lot of taxable Social Security income, you may still owe tax even with the higher deduction.

  • Seniors already had a $2,000 bonus deduction under prior law, so the real increase is only $4,000 more than before.

  • The new deduction starts to phase out once your income goes above $75,000 (for individuals; thresholds differ for couples).

    
    

  What This Means in Practice

  For many retirees, this change will mean lower taxable income and some welcome relief at tax time. But it’s not the same as eliminating taxes on Social Security entirely.

  • Middle- and lower-income seniors who take the standard deduction may see the most benefit.

  • Higher-income seniors may see little to no benefit because of the phaseout.

  • If you itemize (for example, due to mortgage interest, medical expenses, or charitable contributions), you won’t see this extra deduction at all.

    
    

  Final Thoughts

  
  

  The OBBA’s changes are a step toward easing the tax burden on seniors, but the headlines can be misleading. Social Security is not fully tax-free under the new law. Instead, seniors 65 and older simply get a bigger standard deduction, with limits and caveats.

  If you’re retired or approaching retirement, this is a good time to talk with a My Virtual CFO-ATL tax professional about whether you should take the standard deduction or itemize — and how OBBA’s changes will affect your bottom line.