Day 3: Changes in Taxable Social Security—Good News for Many Retirees (But Not All)
Welcome back to our series on how the One Big Beautiful Bill Act (OBBBA) is reshaping the tax landscape.
Yesterday, we talked about tax-free tips for service workers. Today, we’re diving into a change that affects millions of older Americans: the taxation of Social Security benefits.
The OBBBA brings important relief—but not everyone will benefit equally.
What Changed?
Under current law (before OBBBA):
Up to 85% of your Social Security benefits can be taxable, depending on your provisional income.
Provisional income includes:
Adjusted gross income (AGI)
Nontaxable interest (like municipal bonds)
Half of your Social Security benefits
Thresholds where taxation begins (pre-OBBBA) were never indexed for inflation and stayed fixed at:
$25,000 for single filers
$32,000 for married couples filing jointly
Under the OBBBA:
The income thresholds for taxing Social Security benefits have been doubled and indexed for inflation going forward.
New approximate thresholds starting in 2025:
$50,000 for single filers
$64,000 for married filing jointly
This means fewer retirees will owe tax on their Social Security benefits—or will owe tax on a smaller portion.
Who Benefits?
Retirees with moderate income levels who previously fell into the range where their Social Security was partially taxed.
Seniors with pension income, part-time jobs, or IRA withdrawals who may now stay below the new higher thresholds.
Middle-income retirees who can keep more of their benefits untaxed.
For example, a married couple with $60,000 in total income may have had up to 85% of their Social Security taxed under the old rules. Under the new thresholds, they might pay tax on only half—or none—of those benefits, saving potentially hundreds or thousands each year.
Who Should Still Be Cautious?
Higher-income retirees whose income still exceeds the new thresholds will continue paying tax on up to 85% of benefits.
Retirees withdrawing large amounts from retirement accounts could unintentionally push themselves over the new thresholds.
Those with significant investment income (like dividends or capital gains) may still find their Social Security taxed.
State taxes may still apply to Social Security in some states, regardless of the federal changes.
Why Tax Planning Matters Now More Than Ever
Changes to Social Security taxation mean significant potential savings—but careful planning is crucial. Tax planning helps you:
Project whether your provisional income will stay below the new thresholds.
Strategically time IRA withdrawals or Roth conversions to avoid higher taxes on your benefits.
Understand how capital gains, dividends, and other income affect the taxation of your Social Security.
Avoid surprises when filing your return.
Tax planning ensures retirees keep more of their hard-earned Social Security benefits—without accidentally triggering unnecessary taxes.
Bottom line: The OBBBA’s higher thresholds for taxing Social Security are excellent news for many retirees—but higher earners still need careful planning to avoid surprises.
Are you a retiree wondering how much of your Social Security will be taxed under the new rules? Let’s create a personalized tax plan to help you protect your benefits. Schedule a discovery call to learn how our tax planning services can help you save under the OBBBA changes.
Up next: Day 4 – Higher Standard Deduction and Child Tax Credit: How Families Can Benefit (And Who Won’t)
