U.S. retirees may receive federal tax savings of up to $450 in 2026 under a new tax law signed by President Donald Trump, according to IRS guidance and tax policy analysis. The legislation, known as the One Big Beautiful Bill Act, introduces a temporary deduction for taxpayers aged 65 and older to reduce taxable income and lower taxes on Social Security benefits.
Under the provision, individuals aged 65 or older can claim an additional $6,000 deduction on their federal tax return. Married couples where both spouses qualify can claim up to $12,000. However, eligibility phases out at higher income levels.
For single filers, the deduction begins to phase out at a modified adjusted gross income (MAGI) above $75,000 and ends at $175,000. For married couples filing jointly, the phase-out starts at $150,000 and ends at $250,000.
Tax analysts say the deduction could reduce the amount of Social Security income subject to taxation for many seniors.
An example cited by tax policy groups shows that a retired couple earning about $48,000 annually could see their federal tax bill decrease by $450 under the new provision.
Jason Smith, chairman of the House Ways and Means Committee, said the measure effectively removes taxes on Social Security for many seniors, although experts note benefits are not entirely tax-free under current law.
The deduction is scheduled to remain in place through the 2028 tax year unless extended by Congress.
Commerce Secretary Howard Lutnick said President Trump has also expressed interest in eliminating income tax for individuals earning less than $150,000 annually.
Lutnick described a conversation in which Trump indicated he would support such a measure if the federal budget were balanced.
The United States relied primarily on tariffs for revenue before the introduction of the federal income tax in 1913 following the 16th Amendment. Trump has suggested a return to a tariff-based system to fund the government.
During his campaign, Trump stated that the United States could become significantly wealthier by shifting toward tariffs instead of taxing citizens.
In January, he reiterated that idea, suggesting the country should tax foreign nations rather than its own citizens.
Meanwhile, the Republican-controlled House voted in March to limit Congress’s ability to quickly challenge tariffs imposed by the president.
The vote, which passed narrowly, delays efforts to force votes on revoking tariffs and immigration actions for the remainder of the year.
This move effectively blocked an attempt to challenge tariffs on imports from Canada and Mexico sponsored by Representative Suzan DelBene.
Trump has argued that tariffs are necessary to address trade imbalances, bring jobs back to the U.S., and reduce illegal narcotics entering the country.
