The new OBBBA law by President Trump has implications of saving tax on retirees as early as 2026. Additional deductions on the social security taxes are offered to seniors, who are 65 years or above. Even more savings could be possible among married couples. The saving is dependent on income and eligibility. As much as $450 would be refunded to some of the retirees to cover living costs and medical costs.
The new tax plan by President Donald Trump, the One Big Beautiful Bill Act (OBBBA), could lead to tax savings on the American seniors in 2026. Some of the new tax breaks offered by the OBBBA include tips, overtime pay, interest on auto loan, and special deductions on senior citizens. Even though Trump said that the proposal would leave our great seniors without any tax on Social Security, the bill does not entirely spare taxes on Social Security.
The importance of this tax reduction can be explained by the fact that, according to Daily Express US, a survey shows that the Social Security claimants have an extra of 9,108 annually. A number of seniors will spend more on healthcare in the year 2026, and some will lose their ACA coverage as the subsidies will be removed. It is possible that the new tax benefits will reduce the financial burden on about 75 million Americans that receive monthly tax season checks to receive social security benefits.
Additional Tax Deduction of Seniors
The IRS states that individuals that are 65 years old or above can deduct an extra 6,000 on top of the normal deduction. The extra deduction is doubled to 12,000 to married couples both aged above 65. The new deduction of 6,000 makes the retirees less as they have to pay taxes on social security benefits which is taxed depending on the filing status and income earned.
The deduction is eligibility to a maximum of up to $75,000 to single filers and up to 150,000 to married couples till the year 2028. Subsequently, it starts to fall slowly up to $175,000 to individuals and $250,000 to married couples.
The Possible Savings of Retirees Are?
Before OBBBA, a retired couple aged over 65 with annual income of 48,000 and, having a 401 (k) contribution of 2,600, would have paid taxes equal to 5223.60. They now save $450 by paying $4,773.60. This saving of $450 led to an increment in the take-home pay of the couple by 1%.
No tax on Social Security implies that nearly 90 percent of the elderly people will have zero tax applied on the benefits, said Jason Smith who is the chairman of the Ways and Means Committee. The amount of savings that a senior has is dependent on the level of income, their eligibility, and other factors.