How Will "Big Beautiful Bill" Affect Your Railroad Retirement

How the Trump Tax Cuts Could Impact Your Railroad Retirement

Hi everyone, and welcome to another edition of the Highball Advisors Railroad Retirement Whiteboard. I'm John McNamara from Highball Advisors, and today we’re diving into the impact of the recently passed Trump Tax Cuts, or what some have dubbed the “One Big Beautiful Bill,” specifically in relation to your Railroad Retirement benefits.

Trump’s Campaign Promise and Railroad Retirement

Now, during his campaign, President Trump promised “no tax on Social Security.” That sounds great—but what does that mean for those of us in Railroad Retirement who don’t receive Social Security?

Well, here’s the key: your Tier I Railroad Retirement benefits are taxed using Social Security rules. So when you hear “Social Security,” think Tier I. Your Tier II benefits, on the other hand, are more like a private pension and are taxed differently. So this tax cut mostly impacts the Tier I portion.

What the Bill Actually Does

Despite the "no tax on Social Security" slogan, the bill doesn’t eliminate taxes on these benefits. Instead, it raises the standard deduction for seniors—effectively lowering your taxable income.

Here’s how it breaks down:

Starting in 2025, seniors aged 65 and older get an additional $6,000 standard deduction.
- If you're single with income under $75,000, you get the full $6,000.
- If you're married filing jointly and both over 65 with income under $150,000, you each get $6,000—for a total of $12,000.
This benefit phases out:
- For singles with income up to $175,000
- For married couples with income up to $250,000
The provision runs from 2025 through 2028 and then expires (sunsets) unless extended.

Real-World Example

Let’s go through a sample scenario to see the actual savings.

Meet Our Retired Railroader Couple:

Both over 65
Tier I benefit: $3,000/month
Tier II benefit: $1,500/month
Spousal Tier I: $1,500/month
Spousal Tier II: $675/month
Drawing $2,000/month from an IRA

That gives them monthly income of $8,675, or $104,100 annually. But remember, only 85% of Tier I is taxable. So after applying that rule, their taxable income is $96,000.

Under the New 2025 Tax Rules:

Standard deduction: $30,000
Senior bonus: $3,200
New tax cut deduction: $12,000
Total deductions: $45,200

Taxable income: $96,000 – $45,200 = $50,800 Effective tax rate: ~11.06% Federal tax bill: $5,619

Without the New Tax Cut (Current Rules):

Deductions: $30,000 + $3,200 = $33,200
Taxable income: $96,000 – $33,200 = $62,800
Effective tax rate: ~11.24%
Federal tax bill: $7,059

Total Savings:

$7,059 – $5,619 = $1,440

So, while the headline of “no tax on Social Security” may sound bigger than it is, the actual benefit is an extra $1,440 in tax savings for this couple—not insignificant, but not life-changing either.

Final Thoughts

Taxes are a big part of retirement planning. Understanding these changes can help you keep more of your retirement income.

If you’d like help navigating how these tax changes affect your Railroad Retirement, feel free to reach out. I cover tax strategy in detail as part of my Boarding for Railroad Retirement process.

Please like, comment, and share this video if you found it helpful. Thanks for watching, and as always:

Stay safe, stay on track, and take care. So long, everybody!

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Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. Highball Advisors encourages you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Highball Advisors, and all rights are reserved from Highball Advisors, and all rights are reserved.