U.S. retirees may see federal tax savings of up to $450 in 2026 under a recent tax law signed by President Donald Trump, according to IRS guidance and tax policy analyses. The legislation, known as the One Big Beautiful Bill Act, includes a temporary deduction for taxpayers age 65 and older that is designed to reduce taxable income and lower the tax burden on Social Security benefits.
Under the provision, individuals 65 or older can claim an additional $6,000 deduction on their federal tax return. Married couples in which both spouses qualify can claim up to $12,000. Eligibility is phased out at higher income levels.
For single filers, the deduction begins to phase out above a modified adjusted gross income (MAGI) of $75,000 and ends at $175,000. For married couples filing jointly, the phase-out starts at a MAGI of $150,000 and ends at $250,000, the Economic Times of India reported.
Tax analysts say the deduction could significantly reduce the amount of Social Security income subject to taxation for many older Americans.
In an example cited by tax policy groups, a retired couple earning about $48,000 annually could see their federal tax liability fall by $450 under the new rules.
Jason Smith, chairman of the House Ways and Means Committee, said the measure means “no tax on Social Security for our great seniors,” but tax experts note that Social Security benefits are not entirely exempt under current law.
The senior deduction is slated to remain available through the 2028 tax year, unless Congress acts to extend it.
Commerce Secretary Howard Lutnick said in March that President Trump informed him that he wants to eliminate income tax for anyone making less than $150,000 annually.
“I’m in the car with him, and I said we’re going to balance the budget,’” the secretary said on the “All In” podcast last week, Just The News reported.
“And I said, ‘But I have one favor to ask you: If we can balance the budget for you, will you agree to waive all income tax for every person who makes less than $150k a year in the United States of America?’ Which, by the way, is about 85% of Americans,” Lutnick continued.
“And the reason you want to work for Donald Trump is he looks at me, he goes, ‘Sure,’” he said. “You realize, the President of the United States said, ‘If you balance the budget, sure.’ And he’s not lying; he’s not kidding. He’s like, ‘Yeah.’”
The United States did not have an income tax until 1913 after the ratification of the 16th Amendment, funding the government mainly via tariffs. Trump has said he would like to get back to a tariff-based funding system.
“America is going to be very rich again, and it’s going to happen very quickly.” The president said during his campaign to Republicans gathered at his Florida resort. “It’s time for the United States to return to the system that made us richer and more powerful than ever before.”
In January, in a speech promoting his tariffs, he said, “Instead of taxing our citizens to enrich foreign nations, we should be tariffing and taxing foreign nations to enrich our citizens.”
The Republican-controlled House voted in March to block Congress from quickly challenging tariffs imposed by presidents on reports that those imposed by Trump have unsettled financial markets.
The 216-214 vote, primarily along party lines, delays lawmakers’ ability to force a vote to revoke Trump’s tariffs and immigration actions for the rest of the year.
Trump has stated that the tariffs are intended to address unbalanced trade relations, repatriate jobs, and stem the flow of illegal narcotics from abroad, Reuters noted.
The House’s vote effectively halted an effort to challenge his tariffs on imports from Canada and Mexico—a challenge sponsored by Democratic Rep. Suzan DelBene of Washington that was scheduled for later that month.