Tax season may be over for some, but there are many Americans who are always on the lookout for tax breaks and deductions so that they are able to save a few extra bucks the next time Uncle Sam comes calling. Now, a change to the way federal taxes are collected could impact those retirees who filed an extension this year, especially if they made one specific choice when deciding when to retire.
And that decision could set them back up to $6,000, according to some calculations. Keep reading to find out what the deduction is for and whether or not your age at retirement will make you ineligible to claim this Social Security-related tax break.
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I hate to be the bearer of bad news, but if you retired before your official full retirement age (FRA), you will be ineligible to take the newly created $6,000 senior tax deduction (or $12,000 for those filing jointly). According to The Motley Fool, that could leave 2.5 million retirees out in the cold come tax time.
The tax deduction was added to Donald Trump's One Big Beautiful Bill Act, according to the administration, to eliminate taxes on Social Security benefits. However, the publication notes that it doesn't go far enough to eliminate the tax burden on America's retirees, especially those who retired before their FRA, since they are not eligible to take the deduction.
Related: New Report Sounds the Alarm About the 'Catastrophic' Effects of Social Security Cuts
How to Tell if You Qualify
According to Thomson Reuters, only those making under $75,000 when filing single, or $150,000 when filing jointly, will qualify for the full tax break. Then, the discount phases out for those who make more than that, lowering by $60 for every $1,000 you earn over that amount until you reach $150,000 when filing single or $250,000 when filing jointly, eliminating the benefit entirely for higher income earners.
The Deduction Isn't Permanent
If you are one of those retirees who qualify for the deduction, you shouldn't count on having the ability to use it to reduce your taxable income every year. The Motley Fool notes that the deduction will only be available to qualifying Social Security recipients through 2028.
However, if you want to claim the deduction while you can, you'll need to be at least 65 before midnight on the last taxable day of the year.
Related: Financial Expert Jim Cramer Endorses Controversial Social Security Solution That Will Infuriate the Rich
While the deduction may help some Social Security recipients lower their tax burden and keep more money in their pockets, many experts seem to believe that the discount doesn't go far enough to help most Americans. Meanwhile, others worry that the tax break will only further harm the Social Security Administration's (SSA's) growing money troubles, causing the account to run out of funds quicker than the estimated date that it's currently estimated to become insolvent.
Disclaimer: This article is for informational purposes only and does not constitute financial advice.
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