House Republicans’ “one, big, beautiful” tax bill includes a new temporary $4,000 deduction for older adults.

The change, called a “bonus” in the legislation, is aimed at helping retirees keep more money in their pockets and provides an alternative to the idea of eliminating taxes on Social Security benefits, which President Donald Trump and other lawmakers have touted.

The bill provides a “historic tax break” to seniors receiving Social Security, “fulfilling President Trump’s campaign promise to deliver much-needed tax relief to our seniors,” White House Assistant Press Secretary Elizabeth Huston said via email.

The proposal calls for an additional $4,000 deduction to be available to adults ages 65 and over, whether they take the standard deduction or itemize their returns. The temporary provision would apply to tax years 2025 through 2028. The deduction would start to phase out for single filers with more than $75,000 in modified adjusted gross income, and for married couples who file jointly with more than $150,000.

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As a tax deduction, it would reduce the amount of seniors’ income that is subject to levies and therefore reduce the taxes they may owe. Notably, it is not as generous as a tax credit, which reduces income tax liability dollar for dollar.

A median income retiree who brings in up to about $50,000 annually may see their taxes cut by a little less than $500 per year with this change, noted Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center.

“It’s not nothing, but it’s also not life changing,” Gleckman said.

Social Security benefits are taxed based on a unique tax rate applied to combined income — or the sum of adjusted gross income, nontaxable interest and half of Social Security benefits.

Beneficiaries may have up to 85% of their benefits subject to taxes if they have more than $34,000 in combined income individually, or more than $44,000 if they are married and file jointly.

Up to 50% of their benefits may be taxed if their combined income is between $25,000 and $34,000 for individual taxpayers, or between $32,000 and $44,000 for married couples.

Beneficiaries with combined income below those thresholds may pay no tax on benefits. Therefore, a policy to eliminate taxes on benefits would not help them financially.

The proposed $4,000 tax deduction for seniors may help some retirees who are on the hook to pay taxes on their Social Security benefit income offset those levies, according to Garrett Watson, director of policy analysis at the Tax Foundation.

However, the impact of that change would vary by individual situation, he said. For some individuals who pay up to an 85% tax rate on their benefit income, “that $4,000 deduction can make a difference,” Watson said.

Moreover, the cost for the $4,000 deduction would come out of general revenue for income tax, which means it would not directly take money from Social Security’s trust funds, which already face a funding shortfall.

The Tax Cuts and Jobs Act, or TCJA, of 2017, temporarily boosted the maximum child tax credit to $2,000 from $1,000, an increase that will expire after 2025 without action from Congress.

If enacted, the House bill would make the $2,000 credit permanent and raise the cap to $2,500 from 2025 through 2028. After 2028, the credit’s highest value would revert to $2,000, and be indexed for inflation.

However, the plan does “nothing for the 17 million children that are left out of the current $2,000 credit,” said Kris Cox, director of federal tax policy with the Center on Budget and Policy Priorities’ federal fiscal policy division.

Typically, very low-income families with kids don’t owe federal taxes, which means they can’t claim the full child tax credit. 

Plus, under the House proposal, both parents must have a Social Security number if filing jointly and claiming the tax break for an eligible child.

“This bill is taking the child tax credit away from 4.5 million children who are U.S. citizens or lawfully present,” Cox said.

A bipartisan House bill passed in February 2024 aimed to expand access to the child tax credit and retroactively boosted the refundable portion for 2023, which would have impacted families during the 2024 filing season. 

The bill failed in the Senate in August, but Republicans expressed interest in revisiting the issue.

At the time of the vote, Sen. Mike Crapo, R-Idaho, described it as a “blatant attempt to score political points.” Crapo, who is now chairman of the Senate Finance Committee, said in August that Senate Republicans have concerns about the policy, but are willing to negotiate a “child tax credit solution that a majority of Republicans can support.”

Although House Republicans previously supported the expansion for lower-earners, the current plan “shifts directions and focuses the benefits on middle and high-income families,” Maag said. 

House Republicans have advanced trillions of tax breaks as part of President Donald Trump‘s economic package.

After debating the legislation overnight, the House Ways and Means Committee, which oversees tax, passed its portion of the legislation on Wednesday morning in a 26-19 party line vote.

But the battle over the deduction for state and local taxes, known as SALT, remains in limbo.

The text released Monday afternoon would raise the SALT cap to $30,000 for those with a modified adjusted gross income of $400,000 or less. But some House lawmakers still want to see a higher limit before the full House vote.

While the SALT deduction is a key priority for certain lawmakers in high-tax states, the current $10,000 cap was added to help fund the Tax Cuts and Jobs Act, or TCJA, of 2017.

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Following the vote, House Ways and Means Committee Chairman Jason Smith, R-Mo., said in a statement that Ways and Means Republicans will “continue to work closely with President Trump and our House colleagues to get the One, Big, Beautiful Bill that delivers on the President’s agenda to his desk as soon as possible.”   

The full House vote could come as early as next week. But the legislation could see significant changes in the Senate, experts say.

If enacted as drafted, Republicans could also deliver no tax on tips and tax-free overtime pay. But questions remain about the details of these provisions.  

Rather than cutting taxes on Social Security, the plan includes an extra $4,000 deduction for older Americans, which may not fully cover Social Security income, according to some experts.

The $4,000 deduction costs $90 billion over 10 years, compared to $1 trillion for exempting Social Security income from tax, Garrett Watson, director of policy analysis at the Tax Foundation, wrote in a post on X Tuesday.

“Tax filers with no other income sources outside of Social Security would typically see little benefit, while others may see bigger gains from this idea,” he wrote in that thread. 

The House Ways and Means bill also extends the maximum child tax credit of $2,000 enacted via the TCJA, and temporarily raises the tax break to $2,500 per child through 2028.

However, some policy experts have criticized the proposed credit design since lower earners typically can’t claim the full amount.

The proposed legislation “did nothing for the 17 million children that are left out of the current $2,000 credit,” Kris Cox, director of federal tax policy with the Center on Budget and Policy Priorities’ federal fiscal policy division, told CNBC.