How Social Security recipients’ taxes may change this year

Social Security recipients will soon receive statements showing how much of the total benefits they receive in 2025 may be subject to federal taxes.

Changes enacted by Congress this year mean there’s even more reason to pay attention to these tax documents.

The form, known as SSA-1099 or SSA-1042S, will be available online starting Dec. 25, a Social Security Administration spokeswoman said. The agency will begin mailing documents on Dec. 26 and expects to receive all 1099s by the end of January.

The 1099 form shows the total amount of benefits you received during the year as reported to the IRS.

For beneficiaries, the federal tax burden on that income could change with legislation signed into law this year. President Donald Trump’s “Big and Beautiful Bill” introduces a $6,000 deduction for eligible seniors, among other tax changes, while the Social Security Fairness Act could increase benefit income for some pensioners.

The new $6,000 senior tax exemption is limited to individuals age 65 and older. This is a temporary deduction that applies for tax years 2025 to 2028.

Eligibility is based on income, with the full credit available to individual tax filers with modified adjusted gross incomes of up to $75,000 and married couples with modified adjusted gross incomes of up to $150,000. The deduction for incomes above these thresholds would be phased out and completely eliminated for individuals earning $175,000 and married couples earning $250,000.

The senior deduction is available whether a taxpayer takes the standard deduction or itemizes their return.

The “Big Beautiful” package does not eliminate federal taxes on Social Security benefits. Instead, the new senior citizen deduction is intended to help retirees offset the levy on Social Security benefits, and up to 85% of retirees could be taxed based on their “total income amount,” which is the sum of their adjusted gross income, tax-free interest, and half of their Social Security benefits.

For taxpayers, the impact of the new senior citizen deduction will be combined with other changes, particularly an increase in the standard deduction. For tax year 2025, the new “Big Beautiful” law increases the basic deduction to $15,750 for single filers and $31,500 for married couples filing jointly. For tax year 2026, the standard deduction increases to $16,100 for single taxpayers and $32,200 for married taxpayers.

In 2025, Americans 65 and older may also be eligible for an existing additional credit of $2,000 for single taxpayers and $3,200 for married couples filing jointly.

In 2025, an elderly taxpayer could take the total standard deduction on the first $23,750 of income and therefore not owe any federal taxes. The same is true for older couples with incomes up to $46,700.

“The biggest beneficiaries of this additional credit are actually middle- and lower-income taxpayers,” Alex Durante, senior economist at the Tax Foundation, said of the new $6,000 senior credit.

“This effectively eliminates the tax liability for most elderly taxpayers,” he said.

Because the new tax law was enacted in mid-2025, Durante said some seniors are over-withholding federal taxes and could see even larger refunds come tax season.

Marianela Corrado, a certified financial planner, CPA, senior wealth advisor and CEO of Tobias Financial Advisors in Plantation, Fla., said the combination of deductions could result in some retirees having zero or negative taxable income. Collado is also a member of the CNBC Financial Advisor Council.

For retirees, this is an opportunity to consider a Roth conversion by moving money from a pre-tax retirement account to a Roth account and paying taxes on the income now so that money can grow tax-free. This can be especially helpful if done in the years before required minimum distributions must be made, Corrado said.

He also said he may consider selling investments in his portfolio that have appreciated in value. For people with little or no taxable income, selling at a profit costs nothing. By then buying back those securities, taxpayers can step up their basis to today’s values ​​for free, Corrado said.

Another new law, the Social Security Fairness Act, signed by President Joe Biden in January, removed provisions that would have reduced or eliminated Social Security benefits for more than 2.8 million individuals.

Retirees who currently receive pension income based on work that does not include Social Security payroll taxes may receive an increase in their benefits. In addition, spouses and widowers or widowers may be able to receive more benefits and, in some cases, become newly eligible for benefits.

The law applies to benefits starting in January 2024, so these recipients will also receive a lump sum payment for that period.

Some individuals affected by this law may see their taxes increase.

“If you have a lot of other income and suddenly find yourself receiving a lump sum and a large Social Security benefit, it’s absolutely possible that you could be subject to further taxation on your benefits,” Corrado said.

Social Security benefits are taxed based on certain total income thresholds.

Up to 50% of Social Security benefits are taxable for individuals with combined incomes of $25,000 to $34,000 and couples with combined incomes of $32,000 to $44,000. Up to 85% of benefits are taxable for individuals with combined incomes of more than $34,000 and couples with combined incomes of more than $44,000.

The additional income from the Social Security Equity Act “has been a game changer for many of our clients,” said Michael Carbone, CFP, certified financial analyst, and partner at Eppolito Carbone & Company in Chelmsford, Mass.

He said the law has resulted in significant increases for some customers, including one customer who saw a $30,000 increase in annual net income.

The additional revenue will be net income, but affected customers will pay more taxes, Carbone said. That funding could limit their ability to take advantage of strategies that rely on low income, such as Roth conversions or selling valuable assets at 0% long-term capital gains rates, he said.

Some steps must be completed by Dec. 31 to reduce tax liability for the 2026 tax filing season.

Corrado said beneficiaries would be wise to have a tax professional run their projections now.

For example, the full $6,000 senior citizen exemption is only available to individuals with adjusted gross incomes up to $75,000. If your income exceeds that threshold by $5,000, your deduction will be reduced, Corrado said. But taxpayers who know they’re in that situation may be able to prevent it by contributing $5,000 through a qualified charitable distribution, she said.

The senior citizen deduction will be in place until 2028. For some retirees, it may make sense to reduce federal tax withholding from pensions and other sources, Corrado said.

Beneficiaries can best understand the impact of the new law on their personal tax situations by consulting with a tax professional who also acts as a fiduciary, such as a certified public accountant with a personal finance specialist designation, Corrado said.