Readers with personal finance questions can now get expert insight through the Lebo Beat. John McGowan, financial advisor with Carson Wealth will answer select reader-submitted questions and provide professional guidance on topics such as investing, retirement, estate planning, taxes, and other financial matters. If you have a question you would like considered for a future column, email it to info@lebobeat.com. Here is the first answer to question submitted by a Lebo Beat reader.
Q: During the last election cycle, it was said that Social Security would no longer be taxed, is this true? Bill Fraser
A: Hi Bill, thank you for the question. We receive this inquiry from others like yourself quite often. There were a lot of statements promising social security would no longer be taxed, but unfortunately, that change has not transpired in the way most would have thought.
There are situations where social security is not taxable, and these rules have been in place for several years. As it currently stands for married couples filing jointly, if total household income is below $32,000, Social Security benefits are not taxed. Once joint benefits rise above $32,000, only 50% of those dollars are taxed until benefits exceed $44,000. Once collective benefits exceed $44,000, 85% of the benefits are subject to taxation.
There was a slight change with the new tax law (One Big Beautiful Bill) where everyone over the age of 65 receives an additional deduction on their taxes, which is called the “Enhanced Senior Deduction”. This provides an extra $6,000 in deductions per person, which can help slightly offset the taxes for social security — but not entirely.
There is one caveat, however; as your income rises, this deduction decreases. For single filers, this deduction begins to phase out with modified adjusted gross income (MAGI) of $75,000 and is then completely eliminated when MAGI rises above $175,000. For joint filers, the phase out begins with a MAGI of $150,000 and completely phases out at $250,000.
As of today, this additional deduction is only available through 2028; at which time, the incoming administration will be responsible for deciding whether to extend the deduction or allow it to expire.
Because of these changes, the next few years present critical planning opportunities for individuals over the age of 65. For couples, combining the enhanced senior deduction ($12,000) with the standard deduction ($34,700) can create a potential reduction in taxable income of $46,700. In addition, taxpayers may now take the standard deduction and still deduct up to $2,000 in charitable contributions bringing the potential total deduction to just under $50,000.
These changes create an important window for proactive tax planning. Strategies like managing withdrawals from retirement accounts, evaluating Roth conversions, timing capital gains, or coordinating charitable giving may help reduce taxable income and limit how much of your Social Security benefit is ultimately taxable. In some cases, careful planning can help smooth income over several years to avoid higher tax brackets later in retirement. Reviewing these strategies now can make a meaningful difference not only in your current tax situation but also in preserving more of your income and assets over time.
Taking the time to walk through the different options available to you could provide significant benefits for both you and your family in the years ahead.
Questions answered in Lebo Financial Answers are provided by John McGowan, CFA MBA at Carson Wealth.
