Is Social Security Really Tax-Free Now? We're Setting the Record Straight.
- Samantha
- Jul 15
- 2 min read
Updated: Jul 15
School might be out for the summer, but the myths about Social Security taxes are still in session!
There’s been a lot of chatter lately about a “new law” that supposedly makes Social Security completely tax-free. We’ve been getting questions every week… so let’s clear up the confusion:
The truth is: There is no blanket exemption that makes Social Security benefits tax-free.
Here’s what’s actually happening:
✅ A new $6,000 senior deduction has been introduced for taxpayers age 65+ (or $12,000 per couple if you both qualify).
✅ This deduction reduces your taxable income in addition to your standard deduction, which can lower your tax bill, and, in some cases, eliminate taxes on Social Security.
✅ There is an income phase-out: The deduction is reduced by 6% of any gross income over $75,000 (or $150,000 if married).
Here’s an example:
Bob and Elise, both 65, have $70,000 in Social Security benefits (SSB) and $25,000 in pension income. Before the bill: Their tax bill was $1,140. After the bill: Thanks to the new $12,000 deduction, their taxable income is $0… and they owe no federal tax at all.
But this doesn’t automatically mean all retirees pay no tax on Social Security. In fact, the same income thresholds for taxing up to 85% of your benefits still apply.
💡 Here’s a quick checklist to see how this might impact you:
Are you (or your spouse) age 65 or older?
Is your gross income below $75,000 (or $150,000 married)?
Are you relying on Social Security and pension or IRA income?
Have you planned how this deduction could fit into your overall tax strategy?
This is exactly the kind of strategic tax planning we do every day at Compass Financial, because it’s not just about what you earn, it’s about what you keep.
If you’re unsure how these new rules could affect your taxes in retirement, let’s talk. A little proactive planning now could save you thousands later.
👉 Ready to get clarity?
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