The short answer

No. Social Security income is not tax-free under the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025. The taxation rules for Social Security benefits are unchanged. What the OBBBA did create is a new, temporary $6,000 senior deduction for qualifying filers age 65 and older — which may reduce the income that triggers Social Security taxation for some retirees, but does not eliminate it.

The confusion is understandable. During the 2024 campaign, eliminating taxes on Social Security was a high-profile promise. The legislation that passed took a different approach: a broader income deduction rather than a targeted Social Security exemption. The Social Security Administration’s own communications about the bill added to the confusion by stating that “nearly 90% of Social Security beneficiaries will no longer pay federal income taxes on their benefits” — a statement that financial planners widely noted was misleading.

How Social Security taxation actually works

Up to 85% of your Social Security benefit can be subject to federal income tax depending on your “combined income” — defined by the IRS as your adjusted gross income, plus nontaxable interest, plus 50% of your Social Security benefits.

The thresholds that trigger taxation have not changed:

• Single filers: combined income above $25,000 — up to 50% of benefits may be taxable; above $34,000 — up to 85% may be taxable
• Joint filers: combined income above $32,000 — up to 50% taxable; above $44,000 — up to 85% taxable

These thresholds were set in 1983 and 1993 and have never been adjusted for inflation. A retiree with modest income today can easily exceed them.

What the OBBBA actually did: the $6,000 senior deduction

The OBBBA introduced a new deduction — separate from and in addition to the existing standard deduction — for filers age 65 and older:

• $6,000 per qualifying individual (or $12,000 for a married couple where both are 65+)
• Available for tax years 2025 through 2028 only — it expires after 2028 unless Congress extends it
• Phases out for individual filers with MAGI above $75,000 and joint filers above $150,000
• Available whether you take the standard deduction or itemize

For retirees below the income threshold, this deduction reduces taxable income — which in turn may push combined income below the Social Security taxation thresholds for some. That is the source of the claim that “90% won’t owe taxes on benefits.” But the mechanism is the deduction, not a change to the Social Security rules themselves.

What this means for New Jersey retirees

New Jersey does not tax Social Security income at the state level — so the federal picture is the only concern here. However, NJ does tax most other retirement income, including IRA and 401(k) distributions. For South Jersey retirees managing multiple income streams, the interaction between the new senior deduction, Social Security taxability, IRMAA Medicare surcharges, and NJ pension exclusion thresholds requires a coordinated look — not a simple rule of thumb.

For high-income retirees above the $75,000 / $150,000 MAGI thresholds, the new deduction phases out entirely and Social Security taxation continues at the same rates as before.

The WealthCare perspective

We have had many clients ask about this since the OBBBA passed. Our answer is always the same: the principle matters less than the projection. What actually applies to your tax return depends on your specific income sources, your RMD amounts, your investment account distributions, and whether you have a Roth conversion strategy in place.

The WealthCare Process includes a multi-year tax projection that models your Social Security taxability specifically — not based on headlines, but on your actual numbers. For retirees who qualify for the new senior deduction, we incorporate it into your income plan. For those who don’t, we focus on the strategies that do reduce taxable income: Roth conversions, qualified charitable distributions, and careful withdrawal sequencing.

What to do next

If you have heard that Social Security is now tax-free and want to know what actually applies to your situation, please call us at (856) 988-7722 or visit familywealthadvisory.com. This is exactly the kind of question the WealthCare Process is built to answer clearly.