A new federal tax policy could bring a rare win for older Rhode Islanders
Under the One Big Beautiful Bill, a senior-focused tax deduction will sharply reduce—or even eliminate—federal taxes on Social Security income for most retirees.
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In Rhode Island, an estimated 200,000 residents over age 65 are set to benefit.
Social Security No Longer Taxed for Most
The White House reports that under the new law, 88% of seniors receiving Social Security income will owe no federal taxes on it—up from just 64% previously. This change means 14.2 million more retirees nationwide will keep more of the money they earned over a lifetime.
The boost comes from a new senior deduction—$6,000 for individuals and $12,000 for couples over 65—added on top of existing deductions.
For the 2026 tax year, eligible seniors could claim total deductions of up to $23,750 for individuals or $46,700 for couples. In most cases, this amount would completely eliminate taxable Social Security income.
Rhode Island’s Retirees Will Gain Huge Advantage
While Rhode Island is the smallest state in the U.S., it has a large senior population. According to 2023 Census data, 213,000 of the state’s 1.1 million residents are age 65 or older—about 19.3% of the population, the second-highest share nationwide.
Of those, about 200,000 are expected to benefit from the federal tax break on Social Security income. This relief could help retirees stretch fixed incomes further in a state where the cost of living has long outpaced the national average.
Real wages in Rhode Island are projected to increase by $4,100 to $7,400 under the bill, with take-home pay rising by as much as $11,100. That added income could help offset the rising housing costs and taxes that often hit retirees the hardest.
Deduction Isn’t a Universal Solution
While the senior tax deduction offers generous relief, it doesn’t apply to everyone—and the benefits aren’t equal. It primarily helps middle-income retirees who still owe income tax. Seniors living solely on Social Security or small pensions already pay little or nothing in federal taxes, so they won’t notice much difference.
The deduction fully phases out at $175,000 for individuals and $250,000 for couples, excluding wealthier retirees. That leaves a core group of middle-income seniors—those earning too much for assistance but not enough for financial ease—as the main beneficiaries.
Unless Congress votes to extend it, the senior deduction will expire after the 2028 tax year.
A Boost for Aging Homeowners?
High housing costs pose a serious challenge for Rhode Island retirees, especially in Newport, Providence, and Narragansett. For homeowners facing ongoing mortgage payments, climbing property taxes, or rising insurance premiums, the deduction could provide just enough relief to help them stay in their homes.
When combined with a quadrupled SALT deduction cap, some households could see thousands of dollars in extra deductions—vital in high-tax areas.
The timing could be especially favorable. A sizable COLA increase in 2026 may further raise Social Security benefits, giving Rhode Island seniors a rare combination of income growth and tax relief.
