No Tax On Social Security Income?

When I talk to clients and subscribers, there's still a lot of confusion around the new bill and this idea of no tax on social security income. They heard how this special part of the bill is in effect from 2025 to 2028 and it's making some people think about taking social security earlier than planned because they believe they won't be paying tax on it. We get this question a lot and here's a short breakdown for you so that you know how it's going to impact you. Even though it's positioned as no tax on social security, the new tax bill really has nothing to do with social security but it can impact your tax bill. What it did was create a new $6,000 deduction for people who are 65 and older. For example, if you're 62 or 63 and 64 and you do start your social security benefits, you cannot take this $6,000 deduction but if you're 65 to 69 and you're not yet taking social security, you're still going to get that $6,000 deduction and this deduction is in effect from 2025 through 2028 which means that when you complete your taxes next year in April of 2026 for this year 2025, you're going to get a $6,000 deduction if you're over 65. That's pretty much the rule. An important factor though is that you're below the income limits. Here's an example. If you're modified adjusted gross income which is really just income like wages, taxable social security, taxable pensions or traditional IRA withdrawals, if that's over $75,000 if you're single or over $150,000 if you're married, then the $6,000 deduction, that's going to start to get reduced and then it disappears completely if your gross single or over $250,000 if you're married filing jointly. One question I hear is if I itemize my deductions and I don't take the standard deduction, can I still get the $6,000 senior deduction? The answer is yes because it doesn't matter whether you itemize or you take the standard deduction. Here's an example for that. Take Rob. He's single. He's age 66 in 2025. His adjusted gross income is $60,000 and he takes the standard deduction which is $15,750 and then he gets a $2,000 for being over 65 and then plus this new $6,000 senior deduction. Total standard deduction for Rob is $23,750. Now, if you're married and both of you are over 65, the standard deduction is going to be $31,500 plus $3,200 together and then the senior deduction is going to be $12,000. So for those married filing jointly over 65, the total standard deduction is $46,700. Now, I've got a few other strategies you might want to think about when it comes to if you're close to retirement or in retirement that's related to this new bill coming up, but the big takeaway here is don't change your social security strategy solely based on this new deduction. There may be other reasons to start or delay social security due to some of the new rules in this bill, but that has more to do with your tax-efficient withdrawal strategy. So I hope that short video clears up just the confusion that I'm hearing from some people and if it helped you, please like this video and then take a look at this video to see how you might be able to take advantage of some of these new rules that went into effect this year because of the bill. Really, it's mainly for people close to or in retirement already and if you're looking for a wealth management team that helps with tax planning, income planning, and investment strategy, click on the Get Started button on our website. You can find the link below. Take care.