In the last several months, you may have seen headlines or heard on the news that the current administration was going to eliminate taxes on Social Security benefits. Last month, the One Big Beautiful Bill (OBBB) Act was passed by Congress, and while it does address taxation of Social Security benefits, it does not completely eliminate taxes on Social Security benefits.
Rather than eliminating taxes on Social Security benefits across the board, the OBBB Act provides an enhanced tax deduction for older people who receive Social Security benefits. Single filers over age sixty-five can claim a deduction of $6,000, and married filers over aged sixty-five can claim a deduction of $12,000 on their taxes. However, this deduction phases out for single filers with an adjusted gross income of $75,000 and married filers with an adjusted gross income of $150,000.
So how does this affect Social Security Disability recipients? The plain answer is that disabled individuals were left out of the equation, as this change only applies to individuals aged sixty-five and older. Most Social Security Disability beneficiaries will not receive an enhanced deduction on their taxes because most people who rely on SSD benefits are under age sixty-five.
It is also important to note that this enhanced tax deduction is not permanent—it is set to expire after the 2028 tax year. Further, this change to taxation of Social Security benefits will contribute to an accelerated depletion of the Social Security Old Age and Survivors Insurance Trust Fund, as the taxes paid on Social Security benefits are paid right back in to the trust fund. The OASI Trust Fund is now projected to be depleted by 2033 rather than 2034.