Draft Law Title “Unified Whole” of the Senate: Tax Benefits for Seniors
In the Senate's new bill, seniors aged 65 and older can receive a tax deduction of up to $6,000, with eligibility based on income and identity. The House version passed a maximum deduction of $4,000 on May 22, creating competition over this policy.
Both sides agree to establish a specific tax incentive for seniors, rather than eliminating income tax from Social Security, as was promised by President Donald Trump during his campaign. However, due to budget agreement requirements, this bill does not include the proposed elimination of tax on benefits from Social Security.
Senate Tax Deduction Period Extends Faster than House
The Senate bill will reduce the deduction at a rate of 6% for income above the threshold, meaning benefits will phase out faster than the 4% reduction in the House bill. Alex Durante, chief economist at the Tax Foundation, remarks that this difference is particularly significant for those near the income threshold. “A faster phase-out means that receiving the full $6,000 deduction will disappear quicker,” he said.
Meanwhile, the deduction in the Senate bill is larger, but can only be maximized if the applicant qualifies. Howard Gleckman, an analyst at the Urban-Brookings Tax Policy Center, notes, “It depends on your position in the income distribution,” and middle-aged seniors are likely to benefit the most from the Senate version. “It’s better because it helps those who need support more,” he said.
The House version is more flexible, allowing seniors to claim deductions whether they choose the standard method or itemize tax expenses. This feels more comfortable, although Gleckman notes that most seniors in that income bracket do not typically itemize expenses.
The applicant for this deduction, whether an individual or a couple, must have a valid Social Security number. This is a mandatory requirement, with no exceptions for anyone lacking this ID.
Elimination of Social Security tax sidelined to focus on temporary incentives
The intention to eliminate tax on Social Security benefits has been sidelined due to excessive costs. Currently, this benefit is taxed based on a formula that considers combined income, including adjusted gross income, tax-exempt income, and half of the Social Security benefit.
Under current regulations, up to 85% of Social Security benefits are taxed for individuals with incomes above $34,000 and couples above $44,000. Individuals with incomes from $25,000 to $34,000 (individual) or from $32,000 to $44,000 (couple) must pay taxes on 50% of their benefits. This system remains in place because the budget consensus rule prevents amendments.
Rather than eliminating taxes, lawmakers are focusing on proposing temporary deductions for individuals earning less than $75,000 (individual) or $150,000 (couple). Those with higher incomes are excluded from the scope, intentionally directing benefits to those in greatest need.
Both the House and the Senate have incorporated a tax deduction for seniors in their bills, almost ensuring this will be included in the final bill for signing. Once the parties agree, the bill will be presented to President Donald Trump for approval. The White House has called this a “historic tax benefit,” although it is only a temporary solution, not a comprehensive one.
Durante predicts that this incentive will continue to exist. “Based on its appearance in both bills, it’s clear there will be a deduction for seniors,” he said. And if the Senate's $6,000 deduction holds through negotiations, eligible individuals could take advantage of greater benefits before the phase-out rate quickly reduces the deduction beyond 6%.
Source: https://tintucbitcoin.com/senate-de-xuat-thue-tien-dien-tu-cho-lao/
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