The One Big and Beautiful Act (OBBBA) is changing the law in many areas. For example, the Trump administration aims to lower the rates charged to senior citizens so that those most in need can maintain their income without significant changes. It’s important to keep in mind that the government’s income depends on certain economic limits. These limits haven’t changed since the 1980s. Therefore, given the obvious passage of time, the changes in the global economy, and the current inflation rate in the country, seniors have had to pay more taxes on their benefits.
Bisignano: “This is a historic step forward for America’s seniors”
“The bill ensures that nearly 90% of Social Security beneficiaries will no longer pay federal income taxes on their benefits, providing meaningful and immediate relief to seniors who have spent a lifetime contributing to our nation’s”, reads the official statement from the Social Security Administration. To which Frank Bisignano, Social Security Commissioner said: “This is a historic step forward for America’s seniors.”
Although the law doesn’t completely eliminate Social Security taxes, it increases the standard deduction for seniors, meaning many will owe the Social Security Administration (SSA) less or nothing for their income. Under current law, up to 85% of an individual’s Social Security benefits may be taxable if their income exceeds $34,000. For married couples, the limit is $44,000. The new law increases the standard deduction by up to $6,000 for seniors aged 65 and above from 2025 to 2028.
The Byrd Rule was adopted in 1985 and 1986
These changes, so to speak, can be made thanks to the Byrd Rule, which limits what can be included in a tax bill passed through a special process called budget reconciliation. This Byrd Rule, named after Senator Robert C. Byrd, was adopted in 1985 and 1986 by the Senate on a temporary basis as a means of curbing certain practices. “The Byrd Rule was extended and modified several times over the years. In 1990, the Byrd rule was incorporated into the Congressional Budget Act of 1974 as Section 313 and made permanent,” says the official website of the Government.
This process allows the Senate to pass certain bills with a simple majority, such as this one, which passed 51-50, with Vice President J.D. Vance casting the deciding vote. Because of these rules, Congress lacks the power to directly change how Social Security benefits are taxed through reconciliation. This explains why the bill circumvents it by increasing the deduction.
Wealthier retirees likely won’t feel the impact of the new rule
This tax break primarily benefits low- and middle-income seniors. It phases out for individuals earning more than $75,000 and married couples earning more than $150,000. This means that wealthier retirees likely won’t feel the impact of the new rule, as they already pay taxes on most of their benefits.
“Eliminating Social Security taxes would make things much easier for retirees. Many older adults don’t expect to owe taxes in retirement, and this would help avoid unexpected bills. Ultimately, we need real, lasting change, not just lump sums. Older adults deserve long-term relief they can count on,” Karla Dennis, tax advisor and executive director of KDA, tells Newsweek.
The reality is that seniors will likely start feeling the effects when they file taxes in early 2026. But like Karla Dennis, other advisors believe that short-term measures do not solve the underlying problem, which, given the current situation in the United States, could get worse for those who retire in the next 10 to 20 years.
