Did the One Big Beautiful Bill end tax on Social Security?

Many are excited at the news that social security will no longer be taxed after the passing of the “One Big Beautiful Bill.” (OBBB)

So many people are surprised by the idea that it was subject to income tax at all. As I say in The Future Poor and have stated elsewhere “how is my tax that I paid now subject to income tax?” It makes no sense but there it is, it is taxable. 

This is why many are excited by the BBB and its claim that it ends this tax on social security. For many seniors (current and future ones) not paying taxes on benefits puts a few extra dollars in the bank and is a welcome relief when money is tight. It also scratches the itch of confusion about why it would be taxed anyway.

But is that what is actually happening with this new legislation? Are social security checks no longer subject to income tax?

The answer is that Social Security is still subject to income tax the same way it has been. 

If lawmakers wanted to end the tax on social security they would have just said, “there is now no tax on social security.” Done. Simple. Clear. But that is not how the OBBB sets this up. It is important to understand the distinctions and cut past the marketing to the details.

What exists now are some different tax deductions you may be eligible for that offset the tax owed. Did they eliminate the tax? No. Will you owe any taxes? Maybe not. So did the tax get eliminated?

Here is where the wisdom of Obi-Wan Kenobi could be helpful. “You will find that many of the truths we cling to depend greatly upon our own point of view.” 

You may have received an email recently from the SSA applauding the bill and the relief offered to seniors. This is potentially the case for many but may cause other financial issues for those relying on social insurance programs for other needs like healthcare and food. 

These are the important social trade-offs that are bound up in these types of large legislative acts. Individuals are often excited at the prospect of a tax break but when millions of people (mainly seniors and children) have benefits cut we have to weigh the individual versus the social benefit of our decisions. It is estimated that this bill will cut Medicaid and Children’s Health Insurance Program (CHIP) by over $1 Trillion and eliminate over 10 million people from the program by 2034. 

As always, if you come across a financially related article you’d like to send my way please do! 

Best place to send them is to me.

More next time!

Jonathan