On July 3, 2025, the day before passage of the federal law OBBB, an acronym recognized now by many Americans, the US Social Security Administration proudly announced the anticipated new law’s passage proclaiming “Social Security Applauds Passage of Legislation Providing Historic Tax Relief for Seniors.” The Internal Revenue Service followed suit stating “One Big Beautiful Bill Act: Tax Deductions for Working Americans and Seniors” The implication in both announcements is that the OBBB, among other things, would eliminate or essentially eliminate taxation on Social Security benefits. The actual story is a bit more complicated and some commentators have taken the time to parse individual provisions and explain what the law does and does not do.
One of these commentators is Pennsylvania Congresswoman, Chrissy Houlahan, who, in a July 10, 2025 newsletter stated in somewhat greater detail as follows: “First, let’s tackle Social Security. Millions of Americans received an email over the weekend from the Social Security Administration which celebrated the passage of H.R. 1 <OBBB> and claimed that it ‘ensures nearly 90% of beneficiaries will no longer pay federal incomes taxes on their benefits.’ Let me be clear. There is nothing in the bill that eliminates federal taxes on Social Security income or changes its taxation structure. Nothing…
H.R. 1 does provide a temporary tax deduction (from 2025 to 2028) for individuals who are 65 and older phased in for those who claim the standard deduction and who earn below certain income thresholds. People who qualify will receive this temporary deduction whether they are currently on Social Security or not…”
It is noted by the undersigned that other factors not indicated include that some Americans, for instance, those whose “combined income” is under $25,000, do not pay federal income tax on their Social Security now. Tax on Social Security benefits is determined by the interrelationship of “combined income,” that is a portion of actual income and half of the amount of Social Security benefits and tax filing status, not by the benefits themselves and there is also a higher income threshold for this specific deduction where some also might not qualify. In other words the $6,000 deduction for single filers and $12,000 for married couples is temporary ending in 2028, does not apply to everyone, and is a deduction to be included among other deductions in the tax return not a subtraction from the amount to be paid.
Taxation is not the only area where there has been confusion regarding Social Security. Another has arisen in the area of issuance of paper checks. The Social Security Administration announced that, beginning September 30,2025, it would as part of a “broader initiative to modernize payment systems and enhance service delivery” switch all Social Security recipients to electronic payments via direct deposit to accounts or prepaid cards. NAELA E-Bulletin July 25, 2025.
Prepaid cards would be similar to debit cards, a feature familiar to many but probably not everyone. One could easily imagine some confusion especially among very elderly or very disabled Americans who are accustomed to receiving checks in the mail to instead receive what would be, in effect, a debit card. It might, however, be noticed also that checks by mail can be a source of fraud or theft. In any event the SSA reversed its position stating that it will continue to issue some paper checks, even as it favored digital payments. According to an interview with Frank Bisignano, Director, there are “about 600,000 Americans who
still receive their paper checks – it’s a small fraction of people who receive Social Security payments but it’s a population that often needs checks through paper.”
Finally, possibly unrelated to this last indicated action but concerning, many notices have been mailed recently to individuals, some of them clients of my office, apparently by parties soliciting new insurance clients. They state “You may qualify to have your Medicare Part B premium paid for by the state. If you qualify this amount would be added back to your monthly Social Security payments…” The only possible benefit they might be describing is something referred to as “extra care” or QMB or SLMB which might be available to some very low income individuals. This large mailing which looks like it is on carbon paper has been directed to people who would not fit this category and is followed by a solicitation for insurance. With overall confusion now clients do not need one more confusing element added to the game.
