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Social Security tax refund: Expert reveals key Form 1040 hack that 'may reduce' taxes for seniors
Social Security recipients saw higher 2026 taxes after benefit boosts from the Social Security Fairness Act. Most increases are taxable despite new deductions.
With the 2026 tax season underway, some Social Security recipients who saw their benefits increase in 2025 under the Social Security Fairness Act are having to pay more taxes than in 2025. With increased Medicare premiums and less than 3% COLA increase this year, this is adding to the financial burden.
The Social Security Fairness Act, passed by President Joe Biden on January 5, 2025, fixed a rule that reduced or eliminated Social Security benefits for many public workers. Millions of retirees now get fairer, higher Social Security checks. However, experts warn that most of those increased benefits will be taxable.
There is still some respite as, under the One Big Beautiful Bill, a $6000 ($12,000 for couples) deduction on taxes on Social Security is provided. However, that still makes almost 85% of the total social security benefits taxable, CNBC reported.
Will Recipients Have To Pay More Taxes On Social Security This Year?
Yes, most recipients who saw their Social Security benefit amount increase in 2025 after the passing of the Social Security Fairness Act will have higher tax liabilities in 2026 than they did in 2025. As a result, their tax refund for 2026 be less, even if the source of income remains the same. Notably, this is the first tax filing season since the 2025 Act was passed.
Expert Reveals Hack To 'Reduce' SSA Taxes
The lump-sum Social Security payments issued under the Social Security Fairness Act are treated as taxable Social Security benefits in the year they are received and are reported on Form SSA-1099, which is also sent to the IRS. By default, the full amount is included in that year’s income, which can raise a beneficiary’s tax bill, especially if the payment covers benefits from earlier years.
Also read: IRS ‘Where’s My Refund?’ tool: How it works and when you can check your refund status
Lawrence Pon of Pon & Associates in Redwood City, California told CNBC that to “reduce” taxes, recipients can choose a “lump-sum election” on Form 1040 or 1040-SR. This option allows them to recalculate how much of the payment would have been taxable in the prior years it applies to and report only the remaining taxable portion in the current year. Using the election does not require amending past tax returns.
What To Know About Social Security Fairness Act Benefits
The January 2025 Act enabled more than 2.8 million individuals to receive Social Security benefits. The Social Security Administration (SSA) said that it included state teachers, firefighters and police officers, as well as federal employees covered by the Civil Service Retirement System, and workers covered by a foreign social security system.
The SSA website states that these recipients saw their benefits increase by up to $1000, though, in some cases, it was limited to an "insignificant" amount.
