Social Security and the Big Beautiful Bill: What Retirees Need to Know
The recently signed “Big Beautiful Bill” has stirred up plenty of opinions—and understandably so. Some view it as a much-needed win for retirees. Others see it as another complex political maneuver. Regardless of where you land on the issue, what’s most important is understanding how the bill may affect your retirement, especially when it comes to Social Security.
We’ve previously touched on how this new legislation could influence older Americans. Today, we’re diving deeper, unpacking the facts so you can make more informed decisions about your financial future.
The 88% Tax Break Claim: What’s Really Changing?
According to a recent USA Today article, a key talking point of the Big Beautiful Bill is that 88% of Social Security recipients could soon be exempt from paying federal taxes on their benefits. That’s a headline grabber—but let’s unpack it.
Currently, about 64% of seniors aged 65 and older already don’t pay federal taxes on their Social Security, thanks to income thresholds and existing deductions. The new legislation introduces a $6,000 per-person deduction, which could increase that figure to 88%.
But it’s not a permanent change. The deduction is set to expire in 2028, meaning we could revert to current tax levels if it isn’t renewed.
Who Qualifies for the New Deduction?
Under the current language of the bill passed by the Senate on July 1:
If you're 65 or older, and
Your modified adjusted gross income (MAGI) is $75,000 or less (single) or $150,000 or less (married filing jointly),
Then you may be eligible for the full $6,000 deduction.
For those with higher incomes, the deduction begins to phase out. Once your MAGI hits $175,000 (single) or $250,000 (married), the deduction phases out completely.
This means the benefit is income-sensitive. Retirees with moderate incomes stand to benefit most, while higher-income earners may see little or no tax relief.
What About State Taxes on Social Security?
Federal taxes aren’t the only piece of the puzzle. Nine states currently tax Social Security benefits to some extent:
Colorado
Connecticut
Minnesota
Montana
New Mexico
Rhode Island
Utah
Vermont
West Virginia
However, even in these states, many retirees won’t actually pay taxes on their benefits due to income-based exemptions.
For example, in Connecticut, single filers with an AGI below $75,000, or joint filers below $100,000, don’t pay state tax on Social Security. Other states—like Minnesota, New Mexico, Rhode Island, and Vermont—offer similar income-based exemptions.
Encouragingly, West Virginia is phasing out its Social Security tax altogether. By 2026, residents will be able to subtract 100% of their benefits from taxable income.
A Bigger Picture: Could Tax Breaks Hurt the Program?
Here’s where things get a bit more complex. While fewer retirees paying taxes may be welcome news to individuals, it could present long-term challenges for the Social Security system.
Right now, Social Security is projected to only cover 81% of scheduled benefits by 2034, largely due to more money going out than coming in. A portion of its funding comes from taxes on benefits, so reducing that revenue stream could accelerate the program’s shortfall—unless other funding solutions are implemented.
That’s why a short-term tax benefit must be viewed alongside the system’s long-term sustainability.
What Retirees Should Do Next
Understanding all the moving parts—federal deductions, state tax exemptions, income thresholds, and the future of the Social Security program—can feel overwhelming.
That’s why it’s critical to build a personalized financial strategy that addresses your income, tax exposure, and retirement goals. This new deduction may offer relief, but it’s only one piece of your bigger financial picture.
If you’re unsure how these changes may impact you, we’re here to help. You can schedule a meeting at www.OBWMLLC.com/appointments, visit our website at www.OBWMLLC.com, or call our office at (405) 993-6296.
Let’s work together to help you retire with clarity, confidence, and peace of mind.
For more information about the Big Beautiful Bill Act, read our companion article:
👉 The One Big Beautiful Bill Act: What You Need to Know
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Disclosures:
All content discussed in this article is for informational and educational purposes only and does not constitute financial, legal, tax, or investment advice. Opinions expressed are solely those of Olive Branch Wealth Management, LLC and its staff. The information presented is believed to be from reliable sources; however, Olive Branch Wealth Management, LLC makes no representations as to its accuracy or completeness. This article shall not be construed as an offer to sell or a solicitation to purchase any insurance product in any jurisdiction in which the agent is not licensed. Topics should be discussed with a licensed insurance agent, tax professional, or financial adviser before implementation. Olive Branch Wealth Management, LLC is not affiliated with or endorsed by the Social Security Administration or any government agency.
Sources:
USA Today – Social Security tax breaks: What the ‘Big Beautiful Bill’ really means for 88% of retirees
The Motley Fool – 41 States That Don’t Tax Social Security Benefits
