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While researching an article on the impact of the recent One Big Beautiful Bill Act (OBBBA) I stumbled upon a very useful, free Social Security Taxability calculator. The calculator is a downloadable Excel spreadsheet. I found it while viewing a YouTube video presented by The Retirement Nerds. The video did a nice job of explaining some of the provisions of the tax bill, especially the new $6,000 bonus senior deduction. The presenter used the calculator to demonstrate the interaction between income, SS taxability, and how the new deduction comes into play.
I wasn’t familiar with this site or the presenter so I did a bit of research and it seemed legitimate so I downloaded it from this site. I’ve played around with it a number of times and I’m pretty impressed. It is not a complete tax return calculator, but it does a few things well, and provides some useful information for what-if studies. It has been updated for to include the 2025 tax law changes, including the new senior deduction.
In general, you input your “base case” which is your AGI, tax-exempt income, the amount of your SS benefits, and any applicable Schedule 1 adjustments (there is a tab that describes them). The tool calculates the percent, and amount, of your SS benefit that is taxable. It shows the details of that calculation – one of the more complex calculations in the tax code. It also determines your standard deduction, your new senior deduction (if any), taxable income, estimated tax, effective tax rate, and marginal tax bracket. It includes a nice table, and graphic, that shows how much income “headroom” you have until you reach the next tax bracket.
One of the more interesting features is a large table entitled “Incremental scenarios adding more non-Social Security Income”. This table provides 25 rows to investigate the impact of additional income on your tax calculation. You input a dollar amount in the first row, and it increments each row by that amount. For example, if you input $1,000 in the first row, the succeeding rows will be $2,000, $3,000 and so on up to $25,000. The columns in the table update some of the previous tax calculations for the new income amount, with the end result being the revised taxable income. It has a column that clearly shows how, in certain situations, an additional $1 of income can pull additional SS benefits into the taxable category, and how the effective marginal tax rate can be greater than the marginal tax bracket.
There is also nice graphic to the far right that shows a summary of the base case, including how the calculated tax falls into the marginal tax brackets. Someone looking to understand how the taxable portion of your SS benefit is determined, and how additional amounts of income impact your overall tax situation, may find this useful. Roth Conversion studies would be another good use of the tool.
There seems to be a lot of confusion about the new senior bonus deduction.
The new senior bonus deduction is a “below-the-line” deduction so has nothing to do with the taxability of SS benefits. Taxability of SS benefits are determined by “above-the-line” income, deductions and exclusions.
“The line” is the AGI or MAGI line on the 1040.
Exactly
Rick. Thanks for the article and the helpful link to this calculator spreadsheet. I have try to find something like it and have not came up with any thing like it, so thanks again. Great job.
You are welcome. The AARP Tax Calculator is also a good comprehensive tool, but according to an editor’s note is has not been updated yet with changes form the new bill. They are waiting for guidance from the IRS on how the changes will be implemented. I think you can simulate the change by reducing income by the additional standard deduction and new bonus deduction, but proceed with caution in trying to “fake out” the tool.
Is it right to assume no scenario under the new law is worse than the previous taxation of SS? If that is correct, what net gain can detailed analysis provide?
I did the math to re-calculate my estimates. I don’t like getting refunds.
The calculation of what portion of SS benefits is taxable is unchanged, as I wrote in the response to your earlier comment. People that are fortunate to have high incomes will most likely always see 85% of their benefits as taxable. People with very low incomes generally have none of their SS benefits considered taxable. They often have AGI below the standard deduction, and so won’t benefit from the new bonus deduction. People in between may want to do some analysis to see what impact additional income has on their tax bill. This would include a number of the HD community that is looking to do Roth conversions prior to turning on SS, or when they have to take RMDs. The calculator can help them understand the tax impacts. The new law doesn’t make it worse for many taxpayers, it may be better in that it allows them additional “headroom” to withdrawal qualified funds, or do Roth conversions at lower tax rates.
You mean the $6,000 deduction as headroom, right or that they may go from 80% to 50% or zero?
Good question. In the comment above I was referring to the new $6,000 deduction reducing the taxable income. That would give the taxpayer more room to the top of their marginal tax bracket, or possibly drop them into a lower marginal tax bracket. A common tax planning technique is to “fill up” the lower tax brackets with income. In 2025 for a MFJ couple the 12% bracket limit is $96,950 in taxable income. Say that couple had $97,000 in taxable income without the new deduction. The new deduction reduces their taxable income to $85,000. They could consider realizing a Long Term CG of $10,000 which would still keep them under the limit, and the LTCG would be taxed at 0%. Ot they could do a $10,000 Roth conversion at 12%.
I’ve looked and I don’t see anywhere that says the new senior deduction changes the percent of SS benefits that are taxable. Lowering the taxable income may have the effect of moving some or all of the taxable SS benefits into lower bracket. But as I said below, that is my interpretation and I haven’t found a reliable source to verify it. I’d love some of our tax pros to weigh in.
Rick, I picked up more than a few new tax clients that gave up doing it themselves after they encountered that worksheet. Their typical description of the form was that “it’s as clear as mud.
Thanks for the link.
Dan, you are welcome. I meant to add that this might be a nice addition to the tax toolbox that we use in TaxAide. Many clients are very confused by this calculation. I’ve experience this with clients who have an increase in income that pushes some, more, or all of their benefits into the taxable region, and they end up with an unexpected tax due bill. This happened to several clients a few years ago when interest rates went up dramatically, and they received a significant increase in intern income, without any corresponding withholding.
Rick: Use caution on the “estimated tax bill” calculation: this does not take into account returns that use the Qualified Dividend and Capital Gains Worksheet. If some of your income is from investments, this can make a big difference.
Howard, thanks for your comment. As I wrote, it is not a complete tax simulator. It has a specific focus which can help some folks understand certain parts of the tax code.
Yikes, Rick my heads going to explode.
The taxation of SS benefits should have been left alone.
Now we need a calculator to tell us how the lost revenue for the SS trust will be made up.
Dick, from what I understand nothing in the tax code that defines how SS benefits are taxed was changed by the OBBBA, despite what some folks have said. It appears (I don’t think the new IRS forms are available yet) that the new senior deduction is a “below-the-line” deduction, which does not impact AGI or the percent of SS benefits that are taxed. I have seen articles that indicate that the new deduction will reduce the amount of taxes that go to the SS and Medicare Trust funds. I haven’t; seen a good explanation of how that occurs, but this is what ai think happens. What I think happens is this: The new deduction reduces some taxpayers taxable income, which could put the portion of their taxable income that is attributable to SS benefits in a lower tax bracket. Thus the tax on the SS benefits portion is lower than it would have been before the new deduction. But I haven’t found this written anywhere. If you have a clearer or better understanding please share it.
Yeah, I’d like to up-vote this one more than once. Ten years ago I was certain that SS funding would be fixed. Now with just 8 or 10 years before the well runs dry, I’m not so sure any longer.
me too. But this calculator is not to blame.