What Are the Social Security Tax Changes for 2026?
Social Security has several benefit and tax changes for 2026. The One Big Beautiful Bill Act (OBBBA) did not eliminate taxes on Social Security benefits, but it created a new temporary deduction of up to $6,000 for single filers and $12,000 for joint filers age 65 and older intended to offset the benefit’s taxation. Separately, benefits rose 2.8% under the annual cost-of-living adjustment, and the maximum earnings subject to Social Security payroll tax increased to $184,500.
The One Big Beautiful Bill Act (OBBBA), includes some important tax changes with the potential to impact most U.S. savers.
There are many changes in this legislation with the potential to positively impact our clients – from a permanent extension of the tax bracket rate reductions to a permanent extension of the higher estate tax exemptions. In this article, I want to focus on the new tax deduction for American savers age 65+ that’s intended to offset the taxation of Social Security benefits.
There has been much confusion over this new provision, how it is implemented, and how long it will last. And our clients will need our guidance navigating these changes.
So let’s look at the mechanics of this new deduction.
Social Security Taxes
The taxation of Social Security benefits is a relatively new phenomenon, passed in 1983 as part of the Social Security Amendments as a way to shore up the struggling Social Security trust fund. Unlike other forms of income, the taxes paid on Social Security benefits go specifically to the Social Security trust fund.
So what changed with OBBBA?
First and foremost, the bill did not eliminate the taxation of Social Security benefits outright.
This is likely because the Senate was passing the legislation under reconciliation, a process that allows certain types of legislation to pass with a simple majority vote of 51, rather than the Senate’s usual supermajority standard.
So Congress got creative.
Instead of eliminating the taxation of benefits directly, the bill provided a new tax deduction, available to Americans age 65+, intended to offset those taxes. The deduction amount is based on a saver’s modified adjusted gross income (MAGI). It starts at $6,000 for individual filers with up to $75,000 in annual income (and $12,000 for joint filers with up to $150,000 in annual income). The tax deduction then phases out at a rate of six cents per dollar over the income thresholds, completely phasing out at $175,000 of income for single filers and $250,000 of income for joint filers.
This deduction is provided in addition to the existing standard deduction and can also be used by Americans who itemize their deductions. It’s available to all Americans age 65+, regardless of whether an individual has elected Social Security yet.
One more important thing to note about this new tax deduction: It is temporary.
Under current law, this new deduction is only authorized for tax years 2025, 2026, 2027, and 2028. That means unless Congress votes to extend the deduction (and a future President signs the legislation into law), this deduction will go away in the 2029 tax year.
So, for the next few years, our 65+ clients will have a new deduction they can take on their taxes (if they’re filing with a qualifying income level). And they can take this deduction regardless of whether they’ve elected Social Security or chosen to defer it.
How the 2026 Social Security Tax Change Impacts Your Clients
So what does it mean for our clients?
First and foremost, it’s important for our clients to understand they will still pay applicable taxes on their Social Security benefits. Nothing in OBBBA has changed the tax status of these benefits or the calculation of how these benefits are taxed.
However, clients age 65+ will potentially have up to $6,000 in new tax deductions they can take during the next few years. So for many of our clients, their overall tax liability will go down.
And, of course, in mental math, clients are welcome to consider this new tax deduction an offset of the taxes paid on their Social Security benefits. In the end, it’s the total amount of taxes paid that matters most to our clients, not necessarily where those taxes (or deductions) are generated.
So the main impact to our clients? Those age 65 plus could see their income tax bills lowered for the next four years. This will be important for advisors to account for when modeling Roth conversions and other tax-mitigation strategies.
The need for tax diversification generally (and tax-free conversions specifically) has not changed with the passage of OBBBA. Over time, a variety of spending, debt, and demographic factors are still likely to push taxes higher. And it makes sense to convert funds at today’s lower individual income tax bracket rates, which OBBBA has maintained into the foreseeable future.
However, advisors will want to guide their clients through the Roth conversion process with an eye on the new deduction, as clients will want to ensure conversion income doesn’t put this new deduction at risk unnecessarily.
This could influence the conversion pattern for your client. For example, it may make sense to stretch a conversion over 5 or 8 years, to spread out the conversion income while still taking advantage of the new deduction.
While the new deduction is in place, it will be important for advisors to evaluate not just the tax and IRMAA impact of a Roth conversion long term, but also optimize the conversion pattern that minimizes taxes and IRMAA during the conversion itself.
Stonewood’s Roth Done Right software is designed to make this analysis easy. In under 60 seconds, you’ll see the optimal Roth conversion pattern for your clients – in terms of total taxes paid and total taxes saved, deduction included.
This is a powerful opportunity for forward-thinking advisors, as it has become increasingly challenging for a saver to successfully optimize a Roth conversion strategy on their own. In this way, successful advisors can help their clients take advantage of the tax environment we have today to prepare for the risk of rising taxes in the future.
Becky Ruby Swansburg
Becky Ruby Swansburg is CEO of Stonewood Financial, a noted public speaker, and co-author of several industry-leading books, including The New Holistic Retirement. She has built a career in communication and policy, working in the White House under George W. Bush and on Capitol Hill for the Speaker of the House and other Members of Congress.
Keep in mind, here at Stonewood we’re not CPAs. We build analysis tools to help advisors evaluate the potential tax impact of strategies like Roth conversions. Be sure your clients work with a qualified tax and legal professional on their specific situation.
Social Security’s Other Tax and Benefit Changes for 2026
The senior deduction is getting the most attention, but it’s not the only change. Social Security has several benefit changes for 2026 that are worth having ready in a client meeting, separate from the new provisions in OBBBA:
2026 change
2025
2026
Cost-of-living adjustment (COLA)
2.5%
2.8%
Maximum earnings subject to Social Security payroll tax
$176,100
$184,500
Earnings test limit, under full retirement age all year
$23,400
$24,480
Earnings test limit, reaching full retirement age in 2026
$62,160
$65,160
Maximum monthly benefit at full retirement age
$4,018
$4,152
The 2.8% COLA lifts monthly benefits starting with January 2026 payments, but for clients on Medicare, part of that increase is offset by the standard Part B premium rising to $202.90 a month, an increase of $17.90. For higher earners still working, the payroll tax cap moving to $184,500 means more of their wage income is subject to the 6.2% Social Security tax before it stops applying.
Social Security Tax Changes 2026 and the Roth Conversion Conversation
The senior deduction’s phaseout is one more variable to model alongside a client’s tax bracket and IRMAA exposure. Stonewood’sRoth Done Right software accounts for a multi-year conversion strategy against this year’s brackets, so an advisor can see whether a given conversion pace keeps a 65-plus client under the deduction’s phaseout threshold (or whether it’s worth losing the deduction to gain a far-higher long-term tax saving). Request a sample report to see the report in action.
Social Security Tax Changes 2026: Frequently Asked Questions
What are the Social Security tax changes for 2026?
The biggest change is not directly related to Social Security taxation. It’s a new, temporary deduction of up to $6,000 (single) or $12,000 (joint) for filers age 65 and older, created by OBBBA. This new deduction is intended to offset the expense of Social Security benefit taxation for some Americans. Separately, the annual cost-of-living adjustment raised benefits 2.8%, and the maximum earnings subject to Social Security payroll tax rose to $184,500.
Did OBBBA eliminate taxes on Social Security benefits?
No. The bill did not change the tax status or calculation of Social Security benefits. It created a new age-based deduction that can offset a client’s overall tax bill, which in practice lowers taxes for many clients age 65 and older without changing how Social Security itself is taxed.
How long does the new senior deduction last?
The deduction is authorized for tax years 2025 through 2028 only. Unless Congress votes to extend it and a future president signs that extension into law, it expires after the 2028 tax year.
Does a client have to be collecting Social Security to claim the new deduction?
No. The deduction is available to any American age 65 or older who meets the income requirements, regardless of whether they’ve started or deferred their Social Security benefit.
How does the new deduction affect Roth conversion planning?
Because the deduction phases out as MAGI rises, a large Roth conversion in a single year could push a client’s income high enough to reduce or eliminate it. Spreading a conversion over several years can help a client benefit from today’s lower brackets while protecting the deduction during the years it’s in place.
What is the 2026 Social Security COLA?
Benefits rose 2.8% for 2026, reflected in January 2026 payments. For Medicare beneficiaries, part of that increase is offset by the standard Part B premium rising to $202.90 a month.
Sources and References
“H.R.1 – One Big Beautiful Bill Act,” 119th Congress, signed into law July 4, 2025. Cited for the senior deduction amounts, phaseout thresholds, effective years, and the extension of individual tax bracket rates. Available online: https://www.congress.gov/bill/119th-congress/house-bill/1/text
“Social Security Amendments of 1983,” Social Security Administration Historical Background. Cited for the origin of Social Security benefit taxation. Available online: https://www.ssa.gov/history/1983amend.html
7, 8. “2026 Filing Season Updates and Resources for Seniors,” Internal Revenue Service, Tax Tip 2026-14, February 19, 2026. Cited for senior deduction eligibility rules and confirmation that Social Security’s tax treatment is unchanged. Available online: https://www.irs.gov/newsroom/2026-filing-season-updates-and-resources-for-seniors
“The Long-Term Budget Outlook,” Congressional Budget Office. Cited for general context on long-term fiscal and demographic pressure on federal revenue. Available online: https://www.cbo.gov/topics/long-term-budget-outlook
2026 COLA, maximum taxable earnings, and earnings test figures are from: “2026 Cost-of-Living Adjustment (COLA) Fact Sheet,” Social Security Administration. Available online: https://www.ssa.gov/news/en/cola/factsheets/2026.html
Becky helps your clients outsmart Washington and take control of their retirement. Making the complex simple and meaningful? It’s all in a day's work.
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