The Senate’s recently passed version of President Trump’s legislative package includes a provision offering a $6,000 tax deduction aimed at Americans aged 65 and older. While it doesn’t eliminate federal taxes on Social Security income entirely, it significantly expands relief bringing the share of seniors not paying federal taxes on their benefits from 64% up to roughly 88%, according to estimates from Trump’s Council of Economic Advisers. That translates to an estimated 14 million more seniors benefiting from this change.
Under the bill, individuals earning up to $75,000 annually, or couples making up to $150,000, would qualify for the full deduction. For those with incomes above these thresholds, the deduction gradually decreases and phases out completely at $175,000 for individuals or $250,000 for joint filers.
Currently, older taxpayers can claim a standard deduction of $15,000 (or $30,000 for married couples), along with an additional age-based deduction of $2,000 (or $3,600 for couples). The new legislation would modestly increase the standard deduction while adding this extra benefit for seniors.
With the median income for seniors hovering around $30,000 as of 2022, some budget analysts note that many low-income seniors already pay little to no federal income tax. As a result, the deduction is likely to provide more noticeable relief for middle- and upper-middle-income retirees. Marc Goldwein of the Committee for a Responsible Federal Budget pointed out that while the deduction is framed as helping lower-income seniors, it primarily benefits those who already owe taxes.
One concern among budget watchdogs is how this deduction could impact the long-term stability of the Social Security trust fund. Since Social Security benefits are currently partially taxed with those revenues feeding back into the fund the change could cut into that funding stream. The CRFB estimates the new deduction could reduce Social Security-related tax revenue by roughly $30 billion per year. This, combined with other changes in the bill, could push the fund toward insolvency a full year sooner, possibly by 2032.
The Senate version of the bill is projected to cost about $91 billion over four years just from the senior tax deduction provision. By comparison, the House’s version of the bill proposed a smaller $4,000 deduction, carrying a lower price tag of $66 billion over the same period.
These cost projections are causing friction among fiscal conservatives in the House, who expected the Senate to scale back the bill’s tax breaks, not expand them. Figures like Rep. Andy Harris and Rep. Ralph Norman have signaled potential opposition, citing concerns about deficit spending and the impact on entitlement programs.
Despite the internal pushback, House leadership remains intent on moving the bill forward. With a tight deadline and a president eager to sign the legislation by the July 4 holiday, efforts to secure final passage are intensifying.
