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What the “Free Social Security” Promise Really Means – And What It Means for You and IRMAA

Recently, there has been growing buzz around claims that Social Security will now be “tax free” under new legislation. While this has generated attention, the actual impact is more nuanced. Our goal is to help you clearly understand what the law changes, who may benefit, and how it interacts with Medicare IRMAA (Income-Related Monthly Adjustment Amount).

What Has Changed (and What Hasn’t)

The One Big Beautiful Bill Act, signed on July 4, 2025, introduced a new $6,000 deduction for taxpayers age 65 and older, effective for tax years 2025 through 2028.

What changed:

  • A new $6,000 senior deduction is available for those age 65+.
  • It is in addition to the standard deduction.
  • It is temporary and set to expire after 2028.
  • Income-based phaseouts apply.

What did not change:

  • Social Security benefit taxation rules (0%, 50%, 85%) remain unchanged.
  • The deduction does not reduce Adjusted Gross Income (AGI) used for IRMAA.
  • As a result, claims that Social Security is now “free” are overstated.

Who Benefits Most

The effect of the deduction varies by income level:

  • Lower-income retirees may see little change, as their Social Security benefits often were already untaxed.
  • Middle-income retirees (up to roughly ~$75K single / $150K joint) are likely to experience the greatest benefit.
  • Higher-income retirees (above approximately ~$175K single / $250K joint) generally see no benefit due to phaseouts.

How This Interacts With Social Security Taxation and IRMAA

  • The deduction may reduce taxable income, which could modestly reduce taxes owed for some retirees.
  • It does not alter how Social Security benefits are taxed.
  • For Medicare IRMAA:
    • The deduction does not reduce the Modified AGI used to determine IRMAA brackets.
    • Individuals close to IRMAA thresholds will not see relief from this deduction.

What This May Mean for Your Planning

As you look ahead to upcoming tax years, a few points may be helpful to consider:

  • Eligibility: The new deduction applies only to taxpayers age 65+.
  • Your income will determine the benefit: Phaseout rules mean not all taxpayers qualify for the full deduction.
  • Social Security and IRMAA remain unchanged: The deduction affects taxable income, not AGI or IRMAA calculations.
  • Temporary provision: This benefit currently applies only from 2025–2028.
  • State tax laws vary: Your state may treat Social Security and deductions differently.
  • Long-term planning is key: Understanding how this fits into your broader retirement and tax strategy can help you prepare for future years.

If you’re unsure whether this deduction may apply to your situation—or how it may fit into your overall financial plan—we are always here to review the details with you.

Emerald Advisors, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

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