Millions of Social Security beneficiaries received an email from the Social Security Administration in early July claiming the newly enacted “One Big Beautiful” tax and spending bill would “eliminate federal income taxes on Social Security beneficiaries.”

That’s not true and that statement has sparked a lot of confusion.

In a July 3 news release, Social Security Commissioner Frank Bisignano praised the massive tax and spending bill as a “landmark piece of legislation that delivers long-awaited tax relief to millions of older Americans.” In that news release, which was also posted to the agency’s blog, Bisignano claimed that “nearly 90% of Social Security beneficiaries will no longer pay federal income taxes on their benefits, providing meaningful and immediate relief to seniors.”

Despite that statement, the new law does not change existing tax rules. Up to 85% of Social Security benefits will continue to be subject to federal income taxes. But the new law does create a new enhanced tax deduction for Americans age 65 and older, which will help reduce the tax burden for many older Social Security beneficiaries. It will not affect individuals who claim Social Security benefits before age 65.

Under the new law, individuals aged 65 and older can claim a $6,000 tax deduction if their income is $75,000 or less. Married couples aged 65 and older filing jointly may claim up to $12,000 in bonus tax deductions if their combined income does not exceed $150,000. The deduction phases out for incomes above those limits and is eliminated completely when income exceeds $175,000 for individuals and $250,000 for couples. The bonus tax deduction is temporary and is set to expire after 2028.

When Donald Trump campaigned for president, he vowed to eliminate income taxes on Social Security benefits. While the campaign promise was a crowd pleaser with many retirees, it would have been bad news for the financial outlook of the Social Security program. 

Income taxes on Social Security benefits, along with FICA payroll taxes and investment interest earned on trust fund assets, are the main sources of revenue that fund current Social Security benefits. Eliminating income taxes on Social Security benefits would have further accelerated the depletion of the retirement trust, which is expected to be exhausted in 2033. If Congress does not act before then, Social Security benefits would have to be cut by 23% across the board because Social Security can only pay benefits from currently available revenues.

Since 1984, Social Security beneficiaries with total income exceeding certain thresholds have been required to pay federal income tax on some of their benefits. The 1983 Social Security amendments set the benefit income taxation thresholds at a modified adjusted gross income—which includes one-half of Social Security benefit income—of $25,000 for single beneficiaries and $32,000 for married couples.

Because the income thresholds were never indexed to inflation, the proportion of beneficiaries who pay income tax on their benefits has risen over time from less than one in 10 beneficiaries initially to more than half of beneficiaries today.