Keith Mack
In 1993, President Clinton signed into law a bill that increased the tax on Social Security benefits from 50% to 85% for higher-income beneficiaries. This change was part of the Omnibus Budget Reconciliation Act (OBRA), which aimed to reconcile the budget and had been deadlocked in the Senate before Vice President Al Gore's deciding vote. The Social Security Fairness Act, signed into law on January 5, 2025, ended the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO), increasing benefits for certain workers, including teachers and firefighters. Additionally, the One Big Beautiful Bill Act, enacted in July 2025, introduced a $6,000 deduction for taxpayers aged 65 and older, reducing taxable income and taxes due on Social Security benefits.
| Characteristics | Values |
|---|---|
| Date signed into law | July 4, 2025 |
| Name of the law | One Big Beautiful Bill Act |
| Who signed it into law | President Biden |
| What it includes | A $6,000 deduction for taxpayers 65 and older |
| A special deduction for tax years 2025 through 2028 | |
| No change to how Social Security benefits are taxed | |
| Reduction of taxable income and taxes due on Social Security benefits | |
| Provisions that will mean most Social Security recipients won't owe taxes on their monthly payments | |
| Previous law | Omnibus Budget Reconciliation Act (OBRA) passed in 1993 |
| Who signed the OBRA into law | President Clinton |
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What You'll Learn
The One Big Beautiful Bill Act, 2025
The One Big Beautiful Bill Act, signed into law on July 4, 2025, introduces a range of tax deductions for working Americans and seniors. The Act, also known as OBBB, includes a $6,000 deduction for taxpayers aged 65 and older, effective for the tax years 2025 to 2028. This deduction can reduce taxable income and taxes due on Social Security benefits, with the Social Security Administration stating that nearly 90% of recipients won't owe taxes on their monthly payments.
The Act also allows individuals who receive qualified overtime compensation to deduct pay that exceeds their regular rate. Additionally, employees and self-employed individuals in occupations that regularly receive tips can deduct these tips from their taxes, provided they are reported on the appropriate forms.
It is important to note that the OBBB does not amend the tax code regarding Social Security benefits. While the Social Security Administration initially stated that the OBBB would "eliminate federal income taxes on Social Security benefits for most beneficiaries," this was later clarified as a misunderstanding. The Act does not provide a permanent and comprehensive repeal of Social Security taxes.
Prior to the OBBB, there was a separate piece of legislation known as the Social Security Fairness Act, signed into law on January 5, 2025. This Act ended the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO), which had reduced or eliminated the benefits of millions of people who received non-covered pensions. The Social Security Fairness Act increased benefits for certain types of workers, including teachers, firefighters, and police officers.
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Signed into law by President Clinton in 1993
In 1993, President Clinton signed the Tax Reform Act into law. This act aimed to reduce the federal deficit through increased taxes and reduced spending, leading to significant changes in tax laws for individuals and businesses. It created a 36% and 39.6% marginal tax bracket for filers, eliminated the tax cap on Medicare taxes, and increased taxes on social security benefits. The act also raised gasoline taxes by 4.3 cents per gallon, curtailed itemized deductions, and raised the corporate tax rate to 35%.
The Omnibus Budget Reconciliation Act of 1993 was also signed into law by President Clinton on August 10, 1993. This legislation increased the tax put in place under the 1983 law, raising from 50% to 85% the portion of social security benefits subject to taxation. However, this increased percentage only applied to "higher-income" beneficiaries. Beneficiaries with modest incomes might still be subject to the 50% rate or no taxation, depending on their overall taxable income.
In 1993, Joe Biden was the deciding vote in raising taxes on social security from 50% to 85%. This change was part of a major tax bill that President Clinton had laid out in his State of the Union address in February 1993. It is important to note that this increase in taxation on social security benefits did not apply to all beneficiaries and only taxed 50% of benefits at the upper end of a sliding scale.
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Social Security Fairness Act, 2025
The Social Security Fairness Act, signed into law on January 5, 2025, brings significant changes to Social Security benefits. This act, also known as H.R. 82, eliminates the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). These provisions previously led to reduced or eliminated Social Security benefits for over 2.8 million individuals receiving pensions from work not covered by Social Security. By repealing these provisions, the new law increases benefits for specific groups, such as teachers, firefighters, police officers, federal employees covered by the Civil Service Retirement System, and individuals whose work was covered by a foreign social security system.
The Social Security Administration (SSA) has been actively implementing the law and providing updates on their dedicated webpage. As of July 2025, the SSA has processed 92% of the 289,715 new applications received since the Act was passed. Additionally, they have completed sending over 3.1 million payments totaling $17 billion to eligible beneficiaries, achieving this milestone five months ahead of schedule.
The Social Security Fairness Act also addresses railroad retirees, their spouses, and survivors. It ends two statutory reductions: the non-covered service pension (NCSP) reduction and the public service pension (PSP) offset. These reductions impacted individuals receiving public pensions from work not covered by Social Security, and the repeal will result in retroactive restoration of full benefits for months after December 2023.
The Act also authorizes lump-sum retroactive payments for those whose Social Security benefits were previously reduced by WEP and/or GPO. Individuals who began receiving benefits between January 2024 and June 2025 and had their benefits reduced by WEP or GPO should have received any owed back payments. Additionally, the SSA provides a dedicated phone line and resources to assist individuals affected by the Act.
Looking ahead, there are further changes anticipated for Social Security in the coming year. These changes will impact various aspects, including benefit amounts and the full retirement age. The full retirement age, or FRA, will increase to 66 years and 10 months for individuals born in 1959, and it will reach 67 for those born in 1960 or later. Additionally, there are projections of an increase in Medicare premiums, which may impact the net increase in Social Security checks.
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Omnibus Budget Reconciliation Act (OBRA)
The Omnibus Budget Reconciliation Act (OBRA) is a piece of legislation enacted by the US Congress at various times, including 1987, 1990, and 1993. The Act covers a wide range of provisions and has been used to amend existing laws and introduce new ones.
The OBRA of 1987 set out new provisions for Medicare and Medicaid sections, specifically related to new standards of care in nursing homes. This included requirements for nurse aide training, competency evaluation, and a registry for nurse aides. It also imposed civil monetary penalties on HMOs (Health Maintenance Organizations) for various failures, including not providing necessary services and charging higher premiums. Additionally, it amended the Agricultural Act of 1949 to set target prices for wheat, feed grains, cotton, extra-long staple cotton, and rice for 1988 and 1989.
The OBRA of 1990, signed into law by President Bush, was the largest deficit reduction package in real dollars at the time. It included the Budget Enforcement Act, which created caps on discretionary spending and the pay-as-you-go (PAYGO) rule for taxes and mandatory spending. This required that any legislative changes increasing mandatory spending or reducing revenue be fully offset. The 1990 Act also amended the Rural Electrification Act of 1936, authorizing the refinancing and prepayment of Federal Financing Bank loans guaranteed by the Rural Electrification Administration.
The OBRA of 1993 amended the OBRA of 1990 to extend certain requirements, such as veterans with a minimum income level making copayments for specific health care benefits and the authority of the Secretary of Veterans Affairs to obtain financial information for income verification. It also amended SSA Title XVIII to freeze payments for clinical diagnostic laboratory test services and phase in a reduction in the national cap on fee schedule amounts.
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$32.45
Supplemental Security Income (SSI) program
The federal Supplemental Security Income (SSI) program was signed into law by President Nixon on October 30, 1972. The SSI program provides monthly cash assistance to disabled or older people with little income and few assets. The program is administered by the Social Security Administration (SSA), and as of January 2024, 7.4 million people collected SSI benefits.
To be eligible for SSI, individuals must have a severe disability or be over the age of 65, with very low incomes and assets. Specifically, SSI beneficiaries may have no more than $2,000 in assets as individuals or $3,000 as couples, with certain exceptions. The majority of SSI beneficiaries—84%—are eligible due to a severe disability, including blindness.
SSI is funded from general revenues, with expenditures of $65 billion in the 2022 fiscal year, amounting to 0.26% of the gross domestic product. SSI's administrative costs are relatively high compared to Social Security due to its complex rules. While SSI benefits are not enough to lift someone living independently above the poverty line, they do reduce hardship and lessen the need for family support.
In addition to SSI benefits, many SSI beneficiaries also receive Supplemental Nutrition Assistance and housing assistance. Medicaid, which supports home and community-based services, is another crucial resource for SSI recipients, providing access to personal care services, wheelchairs, lifts, and supportive housing.
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Frequently asked questions
This bill was signed into law by President Trump on July 4, 2025.
The One Big Beautiful Bill Act includes a $6,000 deduction for taxpayers aged 65 and older. This applies to tax years 2025 through 2028.
The Act does not change how Social Security benefits are taxed but can reduce taxable income and taxes due on Social Security benefits.
The Social Security Administration predicts that nearly 9 in 10 Social Security recipients will not owe taxes on their monthly payments.
