Markus Andrews

PepsiCo products are shown on Oct. 05, 2021 in Chicago, Illinois.
Scott Olson | Getty Images

Company: PepsiCo
Business: PepsiCo is one of the world’s largest consumer packaged goods companies, with a portfolio of some of the most iconic brands in food and beverage. Its brands include: Lay’s, Doritos, Cheetos, Gatorade, Pepsi-Cola, Mountain Dew, Quaker and SodaStream. Its segments include Frito-Lay North America (FLNA); Quaker Foods North America (QFNA); PepsiCo Beverages North America (PBNA); Latin America (LatAm); Europe; Africa, Middle East and South Asia (AMESA), and Asia Pacific, Australia and New Zealand and China Region (APAC). FLNA makes, markets, distributes and sells branded convenient foods, which include branded dips, Cheetos cheese-flavored snacks, Doritos tortilla chips, Fritos corn chips, Lay’s potato chips, and others. QFNA’s products include Cap’n Crunch cereal, Life cereal, Pearl Milling Company syrups and mixes, Quaker Chewy granola bars, Quaker grits, Quaker oatmeal and others. PBNA makes, markets and sells beverage concentrates and fountain syrups under various beverage brands, including Aquafina, Bubly, Diet Pepsi, Gatorade and others.
Stock Market Value: $211.28 billion ($154.32 per share)

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PepsiCo shares year to date

Activist: Elliott Investment Management

Ownership: ~1.9%
Average Cost: n/a
Activist Commentary: Elliott is a multistrategy investment firm that manages about $76.1 billion in assets (as of June 30, 2025) and is one of the oldest firms of its type under continuous management. Known for its extensive due diligence and resources, Elliott regularly follows companies for years before making an investment. Elliott is the most active of activist investors, engaging with companies across industries and multiple geographies.
What’s happening
On Tuesday, Elliott sent a presentation and letter to the board of PepsiCo detailing the company’s opportunity to reaccelerate growth and improve performance through greater focus, improved operations, strategic reinvestment and enhanced accountability.
Behind the scenes
PepsiCo is one of the world’s largest consumer packaged goods companies, with a portfolio of some of the most iconic brands in food and beverage. Globally, the company is the number one player in snacking and the number two player in beverages trailing only Coca-Cola.

Pepsi is divided between its North America business (60% of revenue) and International (40%). Within North America, its segments are PepsiCo Foods North America and PepsiCo Beverages North America, each of which account for about 30% of the company’s total revenue. Frito-Lay North America, which makes up about 90% of PFNA, is the dominant leader in salty snacks and a consistent growth driver. PBNA has a portfolio of iconic brands, like its flagship Pepsi, Mountain Dew, and Gatorade, and a reach that rivals Coca-Cola in a very attractive and high-margin end market. Despite its scale, brand strength and track record of growth, Pepsi’s stock has underperformed, losing almost $40 billion in market cap over the past three years and trailing its benchmark, the S&P Consumer Staples Index, by 169 percentage points over the past 20 years.
Strategic missteps in the company’s core North America businesses are at the root of this underperformance. In 2010, both Coca-Cola and Pepsi acquired most of their bottlers. However, while Coca-Cola moved to refranchise its bottling business, Pepsi kept these vertically integrated. This decision has proven to be a costly mistake for the PBNA segment.
Prior to this strategic divergence, PBNA’s operating margins were 300 bps higher than Coca-Cola. Now, PBNA’s operating margins are 1,000 bps lower, reflecting the cost pressures that come with keeping these cost-intensive and lower margin operations in house.
PBNA’s second misstep was its response to the changes in consumer soda preferences. As soda consumption declined in the early 2000s, PBNA shifted its focus away from soda and towards healthier categories. While this was justified at the time, soda preferences have since stabilized, yet PBNA has not been reinvesting into soda. This lack of focus on its core products has had serious repercussions, including the delayed launch of Pepsi Zero Sugar and reduced investments in core brands like Mountain Dew. Moreover, instead of putting money into these proven brands and products, Pepsi has overextended into weaker brands like Starry, Rockstar, and SodaStream, while also expanding into other stock-keeping units, or SKUs, including limited-time offerings and flavor extensions, resulting in higher manufacturing and distribution costs. As a result, PBNA has around 70% more SKUs than Coca-Cola despite generating about 15% less in retail sales.
PBNA’s weaknesses have forced Pepsi to become increasingly dependent on PFNA, and its FLNA core, to sustain overall growth and meet performance targets.
In 2020, expecting increased demand from Covid, Pepsi began to pursue aggressive investment in PFNA, with capital expenditures rising from $3.3 billion in 2018 to $5.2 billion in 2022. There was some logic to this decision at the time, but the Covid-fueled growth didn’t last. Yet capex has continued to rise to $5.3 billion in 2024, despite FLNA sales actually contracting 0.5%.
To make matters worse, Pepsi was not just increasing capex, but selling, general and administraive costs as well and PFNA’s operating margins fell from 30% to 25% over this time period.
These problems have heavily weighed on Pepsi’s overall performance, as it has caused the market to largely overlook its prosperous international business, which is growing quickly with expanding margins. Once a premium growth offering, Pepsi currently trades at 18x P/E versus a ten-year average of 22x, and an over 4 turn discount to its benchmark compared to a historical 1.4 turn premium.
Elliott, who has announced a $4 billion position in PepsiCo, issued a letter and comprehensive presentation detailing its opportunity to reaccelerate growth and improve performance through greater focus, improved operations, strategic reinvestment and enhanced accountability. For PBNA, Elliott believes the first step is refranchising the bottling network. This move makes a lot of sense – returning to a system that historically outperformed its closest competitor – from the time PepsiCo refranchised its bottlers in 1999 until it repurchased them in 2010, the PepsiCo system significantly outperformed the Coca-Cola system.
Next is portfolio optimization. PBNA simply has too many products and needs to rationalize its SKU count and divest from underperforming brands. Elliott points to the recent sale of Rockstar to Celsius as a prime example of the opportunities that exist to simplify the portfolio.
Both of these steps should free up PBNA’s spending power, which Elliott believes should be reinvested in the core soda franchises and select new growth categories (i.e. protein and probiotics). For PFNA, given its significant deceleration in top-line growth, Elliott believes it is time to halt this aggressive growth strategy and realign its cost base and optimize the portfolio.
Elliott specifically points to Quaker as a potential divesture, highlighting its center of the plate products that rest outside FLNA’s snack core. Moves like these would allow PFNA to concentrate on areas where it has true competitive advantage, specifically in its FLNA products, as well as help restore margins and free up capital for reinvestment in both organic growth and accretive bolt-on M&A. Elliott believes that these changes to the North American business would not only improve the company’s operations but also help reset the greater Pepsi investment story.
Currently, this is a story of underperformance and poor execution, which has weighed down on the company’s valuation and left the international business overlooked and at a discount.
Specifically, Elliott believes that if this plan is implemented effectively, it can provide at least 50% upside to shareholders. Elliott is one of the most prolific activist investors today and has the resources and track record to influence meaningful change at these types of megacap companies.
But track record and resources are meaningless if you do not present a comprehensive plan that demonstrates a thoughtful path for long-term value creation, and Elliott’s 74-page presentation does just that.
Additionally, while activists are often unfairly stereotyped as short-term investors due in part to some who are occasionally correctly characterized that way, this presentation should be viewed as “Exhibit A” in how activists like Elliott have evolved over the years to be long-term minded in alignment with shareholders. Elliott’s plan includes recommendations like: “Reinvest to Revitalize Core and Grow with Focus,” “Pursue Organic and Inorganic Investment To Drive Long-Term Growth,” “then use the incremental proceeds from these actions to reinvest to drive long-term growth,” and “By right-sizing costs and shedding non-core assets, PFNA can unlock capital to reinvest both organically and inorganically to fuel long-term grow.”
In fact, in 74 pages, Elliott uses the word “reinvest” 54 times and not once uses the word “buyback” despite acknowledging how undervalued Pepsi shares are now. Yes, share buybacks now might be great for the short-term, but Elliott’s reinvestment plan is what will be best for the long-term.
For all of these reasons, it is hard to argue with Elliott’s analysis or recommendations and we would expect that shareholders and management agree with much, if not all, of it. Assuming that, the next step is execution of the plan and this might be the most understated, but important, part of Elliott’s presentation.
A good activist and good board members support management in executing their plan but holds them accountable if they fall short. That is exactly what we expect Elliott to do here. At this early stage, Elliott’s plan appears straightforward enough that we do not expect there to be much pushback, and governance changes do not seem necessary at this point to make an impact. That being said, we expect Elliott to continually monitor the situation and progress of management and hold them accountable if they fail to deliver on strategic actions and updated financial targets.
Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments. More

ETF Strategist

ETF Street
ETF Strategist

Interest in physical gold and gold-related financial investments has soared amid the precious metal’s recent rally.
When it comes to buying gold, gold exchange-traded funds are “the most liquid, tax efficient and low-cost way to invest,” said Blair duQuesnay, a chartered financial analyst and certified financial planner.
Here’s what to know before piling into the precious metal.

Gold prices notched another fresh record this week as more investors piled into the metal amid economic uncertainty and rising bets for a Federal Reserve rate cut.
So far this year, bullion has gained about 35% as of Friday’s close. Spot gold is now near $3,600 an ounce.

“Without a doubt, gold has been trending higher, and it’s getting a lot of attention from investors,” said Blair duQuesnay, a chartered financial analyst and certified financial planner, who is also an investment advisor at Ritholtz Wealth Management.

Investors regard gold as protective against “bad economic times,” according to research by the Federal Reserve Bank of Chicago. As a safe-haven investment, gold tends to perform well in low-interest-rate environments and during periods of political and financial uncertainty. 
“Gold checks all of those boxes,” said Sameer Samana, head of global equities and real assets at the Wells Fargo Investment Institute.

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According to Wells Fargo Investment Institute’s latest investment strategy report, its analysts “expect ongoing gold purchases by global central banks and heightened geopolitical strife to support demand growth for precious metals.”

The ‘tax efficient and low-cost way’ to invest in gold

To invest in the precious metal, investors can either buy physical gold or gold-related financial investments. 

Most experts recommend getting investment exposure to gold through an exchange-traded fund that tracks the price of physical gold, as part of a well-diversified portfolio, rather than buying actual gold coins or bars.
“In times of acute stress, gold stocks underperform, so to the extent that people want exposure, a gold bullion-backed ETF does a better job than gold-related equities and gold miner stocks,” said Samana.
SPDR Gold Shares (GLD) and iShares Gold Trust (IAU) are the two largest gold ETFs, according to ETF.com.
“Gold ETFS are going to be the most liquid, tax efficient and low-cost way to invest in gold,” duQuesnay said.
“It’s much more inefficient to own physical gold,” according to duQuesnay, largely due to higher transaction costs and storage considerations of bullion, including bars and coins.
Alternatively, gold mining stocks are not as closely linked to the underlying price of gold and are more tied to business fundamentals, she added.

Despite gold’s record run, financial advisors generally recommend limiting gold exposure to less than 3% of one’s overall portfolio. 
CNBC Financial Advisor Council member duQuesnay said she has no gold in the portfolios she manages for her clients, in part because of the temperamental nature of any trendy investment.
“Are we in the third inning of this rally of the ninth inning? Gold is priced as a commodity, and that can make it hard to pinpoint the fundamentals,” she said.
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President Donald Trump’s “big beautiful bill” raised the state and local tax deduction, known as SALT, to $40,000 for 2025.
Taxpayers who itemize tax breaks can claim the SALT deduction, which includes state and local income taxes and property taxes.
Raising the cap on deductions ultimately reduces the amount of revenue the federal government takes in. 

President Donald Trump’s “big beautiful bill” raised the state and local tax deduction, known as SALT, to $40,000 for 2025. The change comes less than a decade after a cap was placed on this tax break for the first time in its history.
Taxpayers who itemize tax breaks can claim the SALT deduction, which includes state and local income taxes and property taxes. Trump’s 2017 legislation capped SALT at $10,000. Before 2018, the deduction was unlimited — but curbed by the alternative minimum tax for some wealthier households.

“This was in effect for over 100 years prior to the 2017 passage of the Tax Cuts and Jobs Act,” said Rep. Mike Lawler, R-N.Y., who led the push on Capitol Hill for the higher cap. 
More from Personal Finance:New bill would eliminate taxes on Social Security benefitsRecord numbers of retirement savers are now 401(k), IRA millionairesWhy coffee prices are so high — and where they’re headed next
Congress introduced an unlimited state and local tax deduction in 1913. Lawmakers’ goal: cut down on what some consider double taxation.
But when Republicans needed ways to pay for other tax breaks in the 2017 bill, they homed in on capping the state and local deductions, arguing they primarily benefited wealthier Americans in high cost-of-living areas.

Who benefits from a higher SALT cap

Households making $1 million or more would receive half of the benefit if the SALT cap were repealed, according to a 2021 report from the Tax Policy Center.

But data shows less-wealthy families stand to save from the higher cap, too, especially those in high cost-of-living areas outside major cities.

Arrows pointing outwards

In 2022, the average SALT deduction was close to $10,000 in states such as Connecticut, New York, New Jersey, California and Massachusetts, according to a Bipartisan Policy Center analysis with the latest IRS data. Those high averages indicate “that a large portion of taxpayers claiming the deduction bumped up against the $10,000 cap,” researchers wrote.
Meanwhile, the states and district with the highest share of SALT claimants were Washington, D.C., Maryland, California, Utah and Virginia, the analysis found.
Higher property taxes are also putting pressure on many homeowners. The national median annual property tax increased 23% between 2019 and 2023, according to the National Association of Realtors.
State and local taxes are crucial for funding public services. In 2022, New York state and local governments spent $15,368 per person. That year, the state levied $12,751 in tax per person, according to the Citizens Budget Commission of New York.
“That took care of roads, bridges, school districts,” said Westchester County Executive Ken Jenkins. Westchester County in New York has some of the highest property tax bills in the country.

Raising the cap on deductions ultimately reduces the amount of revenue the federal government takes in. 
This adds to the national deficit, which stands at $1.628 trillion in fiscal 2025, according to the Treasury Department.
The higher SALT cap is expected to increase the national debt by more than $142 billion over 10 years, according to the Joint Committee on Taxation. The Tax Foundation estimates that the heightened cap would cost about $320 billion compared with an extension of the existing cap.
Watch the video above to learn more about why Congress raised the SALT cap this summer.
— CNBC personal finance reporter Kate Dore contributed reporting to this story.
Correction: This article has been updated to correct the title of the Citizens Budget Commission of New York. More

The Powerball jackpot soared to an estimated $1.8 billion on Friday ahead of Saturday’s drawing.
It’s the second-highest grand prize in U.S. lottery history, behind the $2.04 billion jackpot won in November 2022.
However, the big winner can expect a hefty tax bill that will cut significantly into their prize.

Justin Sullivan | Getty

Roughly $198.3 million goes straight to the IRS

The Powerball jackpot winner can expect a large upfront federal tax withholding. The IRS requires a mandatory 24% withholding for prizes that exceed $5,000.
If you choose the $826.4 million cash option, the 24% federal tax withholding automatically reduces your winnings by $198.3 million.

But the windfall pushes you into the 37% tax bracket, and your bill will likely be higher, certified financial planner John Chichester Jr., founder and CEO of Chichester Financial Group in Phoenix previously told CNBC.

How to calculate your federal tax brackets

The next Powerball jackpot winner easily lands in the 37% federal income tax bracket, regardless of whether they choose the lump sum or yearly payments.
For 2025, the 37% rate applies to individuals with taxable income above $626,350 and married couples filing jointly earning $751,600 or more for 2025.
You calculate taxable income by subtracting the greater of the standard or itemized deductions from your adjusted gross income.
But the 37% rate doesn’t apply to all of your taxable income. For 2025, single filers pay $188,769.75 plus 37% of the amount over $626,350. Meanwhile, joint filers pay $202,154.50 plus 37% of the amount over $751,600.
The jackpot winner’s remaining tax bill after the 24% federal withholding depends on several factors, but could easily represent millions more. President Donald Trump’s “big beautiful bill” raised the standard deduction, among other breaks, which could reduce taxable income for many filers in 2025.

You may also owe state taxes, depending on where you live and where you purchased the ticket. Some states have no income tax or don’t tax lottery winnings, but others have top-income state tax brackets exceeding 10%. 
Powerball isn’t the only chance to win big. The jackpot for Friday night’s Mega Millions drawing now stands at an estimated $336 million. The chance of hitting the jackpot in that game is roughly 1 in 290.4 million. More

The labor market has weakened considerably and isn’t presenting many new opportunities for job seekers.
The U.S. economy lost 13,000 jobs in June, according to the monthly jobs report issued Friday. It’s the first monthly loss since 2020.
There are ways for job seekers to enhance their odds of success. Career experts said patience is key in the current market.

Jobseekers during a Hospitality House career fair in San Francisco on Aug. 13, 2025.
David Paul Morris | Bloomberg | Getty Images

The outlook seems to be getting worse for job seekers.
The U.S. economy added just 22,000 jobs in August, below expectations, and the unemployment rate rose to 4.3%, the Bureau of Labor Statistics reported Friday.

Meanwhile, a data revision showed the economy lost 13,000 jobs in June — the first month of job losses since December 2020. That loss ends the consecutive-job-growth streak that had lasted 53 months, from January 2021 through May 2025, according to Daniel Zhao, chief economist at Glassdoor, a career site.

Outside of the pandemic, the U.S. economy hasn’t added this few jobs in the first eight months of a year since 2010, around the Great Recession, wrote Laura Ullrich, director of economic research for North America at Indeed.
“August’s Employment Report confirmed that the labour market has headed off a cliff-edge,” Bradley Saunders, a North America economist at Capital Economics, wrote in a note Friday.

A frozen job market

The report piles on top of other data issued this week showing a frozen labor market for job seekers, economists said.
In July, the number of unemployed people eclipsed the number of job openings for the first time since April 2021, according to BLS data issued Wednesday.

Employers have been hiring at the slowest pre-pandemic pace since about 2013. Meanwhile, layoffs have been low by historical standards, suggesting employers are in a holding pattern amid economic uncertainty and policy changes like tariffs, economists said.
Of course, the unemployment rate — which is at its highest in almost four years — is still at a “perfectly healthy level” relative to historical standards, Saunders wrote.

Hiring in certain sectors like healthcare and hospitality also remains “decent,” Ullrich wrote. But there’s risk ahead that healthcare hiring slows further amid reduced federal Medicaid and social assistance funding in coming months and years, she wrote.
All told, it’s a “really challenging” environment for jobseekers, said Mandi Woodruff-Santos, a career coach.
“Think of the worst game of musical chairs you ever played, where there are 12 chairs and they’ve let 100 people go after those 12 chairs,” she said. “That’s kind of how it feels these days.”

Advice for jobseekers

It’s also important to keep your skills “sharp,” by staying current on new software your industry may be using, for example, Woodruff-Santos said.
Show off the skills and knowledge you already have to your professional network, leveraging online platforms like LinkedIn to talk about what you do or are passionate about, she added. It’s a good way to get attention from people who may not remember you.
“You can create your own platform,” Woodruff-Santos said. “Use your voice.”

The main thing is to keep “moving forward and doing something,” perhaps by getting a part-time job in the meantime or broadening your job search to sectors in which your skills are transferrable, Ullrich said. Even volunteer opportunities can look like work experience on a resume, which may show hiring managers you are adaptive, she added.
Additionally, don’t overlook “pivoting in place,” Woodruff-Santos said. Seek out opportunities to advance internally at your current company, whether taking on more responsibility, seeking a promotion or shadowing someone to pick up new skill sets, she said. There are ways to be entrepreneurial in your current job to set you up for future success, she said.

“What people really need right now is patience,” Woodruff-Santos said.
“You’ll start to feel like there’s no hope, but you can’t let that cloud weigh you down,” she said — lean on colleagues, friends, peers and coaching communities to help keep you going. More

ETF Strategist

ETF Street
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The ability to outperform during volatile periods is an oft-touted benefit of actively managed mutual funds and ETFs.
However, just 33% beat their average index fund counterpart from July 2024 through June 2025, Morningstar found.
This was a period when elections, executive orders, tariffs and geopolitical risks provided ample volatility, an analyst said.

Olga Rolenko | Moment | Getty Images

Active funds “struggled mightily” to beat their index fund counterparts over the past year, according to a recent Morningstar report.
That happened even amid market gyrations tied to tariffs and geopolitics — the kind of volatile periods during which active managers typically claim to outperform, said Bryan Armour, director of ETF and passive strategies research for North America at Morningstar.

Just 33% of actively managed mutual funds and exchange-traded funds had higher asset-weighted returns than their average index counterparts from July 2024 through June 2025, after accounting for investment fees, according to a Morningstar report published in August.
That’s a drop of 14 percentage points from the prior year, it found.

Active funds don’t capitalize on ‘roller coaster’

Money managers who use active management pick stocks, bonds and other financial assets that they think will beat the broad market.
By contrast, index funds don’t employ stock-picking; they track the market instead of trying to beat it.
An oft-touted selling point of active managers is stock pickers’ ability to make key trades in volatile periods to beat investors who passively ride the market’s ups and downs.

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However, data has generally disproven that thesis, Armour told CNBC.
“Elections, executive orders, tariffs, and geopolitical risks made for a roller-coaster ride during the 12 months through June 2025,” he wrote last month. “Conventional wisdom says active managers should better manage those complexities, but performance says otherwise.”
The trend holds over the long term, too.
Just 21% of active strategies survived and beat their index counterparts over the 10 years through June 2025, Morningstar found.

Success varies by sector

Of course, success varies greatly by sector, data shows.
For example, index U.S. large-cap stock funds — such as ones that seek to track the S&P 500 index — almost always beat their actively managed counterparts over the long term, Armour said.
Just 14% of actively managed U.S. large-cap funds have beaten the S&P 500 over the past 10 years, according to SPIVA.

In addition to having low success rates, large-cap active funds can also carry steep penalties for picking a loser, Armour said. In other words, when they underperform their benchmark, that underperformance is relatively large.
Conversely, active managers generally fare better in less liquid areas of the market, like fixed income, real estate, and small-cap and emerging-market stocks, Armour said.
For example, 43% of actively managed high-yield bond mutual funds and ETFs beat their index counterparts in the past 10-year period, according to Morningstar.

Fees are the key

Fees are the key driver of index funds’ success when compared to active funds, Armour said.
Index funds carry a 0.11% average asset-weighted annual fee, while active funds carry a 0.59% fee, according to Morningstar.
Active funds need to have higher relative returns just to overcome that fee differential.
Beyond that, higher fees also eat into investor earnings. For example, an investor with $100,000 who earns 4% per year and pays a 0.25% fund fee would have $208,000 after 20 years, while the same investor paying a 1% fee would have $179,000, or $29,000 less, according to the Securities and Exchange Commission.
Since index funds own all the securities in a broad market index, they are guaranteed to own the relative winners and losers. While active managers may own more of the winners than their index counterparts, they also risk missing out, Armour said.
Many active managers took risk off the table in April when President Donald Trump first announced so-called “reciprocal” tariffs, but the market then proceeded to rebound quickly, Armour said. More

President Donald Trump’s “big beautiful bill” helps older adults who pay federal taxes on Social Security benefits with the addition of a new temporary senior deduction.
Now one senator is proposing a bill that would eliminate those levies on benefits entirely.

A Social Security Administration (SSA) office in Washington, DC, March 26, 2025.
Saul Loeb | Afp | Getty Images

President Donald Trump’s “big beautiful bill” provides relief to certain Social Security beneficiaries who pay taxes on their benefits.
But it doesn’t eliminate those levies entirely.

Now, Sen. Ruben Gallego, D-Arizona, introduced a bill on Thursday — titled the You Earn It, You Keep it Act — to eliminate taxes on Social Security benefits. A House version of the bill was introduced by Rep. Angie Craig, D-Minnesota, in April.
Gallego’s bill would permanently eliminate federal taxes on Social Security benefits.
It would also expand the Social Security payroll tax to apply to annual earnings over $250,000. Currently, the maximum earnings subject to Social Security payroll taxes is $176,100 in 2025. Consequently, high earners may only pay into the program for part of the year.
“Despite decades of paying into the system, seniors are still forced to pay taxes on their hard-earned benefits — all while the ultra wealthy barely pay into the system,” Gallego said in a statement.

How Social Security benefits are taxed

Sen. Ruben Gallego, D-Ariz., questions South Dakota Gov. Kristi Noem, President-elect Donald Trump’s nominee to be Homeland Security secretary, during her Senate Homeland Security and Governmental Affairs Committee confirmation hearing in Dirksen building on Friday, January 17, 2025.
Tom Williams | Cq-roll Call, Inc. | Getty Images

Social Security recipients may owe federal income taxes on their benefits depending on their income.

How much they may owe is based on a formula known as combined income — the sum of adjusted gross income, tax-exempt interest income and half of Social Security benefits.
Up to 50% of benefits may be taxed for individual tax filers with between $25,000 and $34,000 in combined income, or married couples who file jointly with between $32,000 and $44,000.
Up to 85% of benefits may be taxable for individuals with more than $34,000 in combined income or couples with more than $44,000.

How the ‘big beautiful’ tax law helps seniors

Republican presidential nominee former President Donald Trump arrives to speak at a campaign event at Harrah’s Cherokee Center on August 14, 2024 in Asheville, North Carolina. 
Grant Baldwin | Getty Images

Republicans’ new “big beautiful” law includes a new senior deduction aimed at helping to defray the effects of federal taxes on Social Security benefits.
Adults aged 65 and over may be able to claim an additional deduction of up to $6,000.
Whether beneficiaries will benefit from the change will depend on their income.
The full deduction will be available to individual taxpayers with up to $75,000 in modified adjusted gross income or married couples with up to $150,000. The deduction will gradually phase out for taxpayers with incomes above those thresholds.
The temporary deduction — which will be in effect for tax years 2025 through 2028 — will be available to eligible taxpayers regardless of whether they take the standard deduction or itemize their returns.
Middle-income taxpayers stand to benefit the most from the policy, according to tax experts, since low earners may already be exempt from federal taxes on benefits and higher earners will be above the phaseout thresholds.

How ‘You Earn It, You Keep It’ may affect Social Security

Unlike the temporary senior deduction recently signed into law, Gallego’s You Earn It, You Keep It proposal would eliminate federal taxes on Social Security benefits for all beneficiaries.
To be sure, it remains to be seen whether it may get enough support to become law.
The proposal does have the support of The Senior Citizens League, a nonpartisan senior advocacy group that is petitioning Congress to stop taxing Social Security benefits. Eliminating federal taxes on Social Security benefits is a “commonsense step to ensure older Americans can keep more of what they’ve earned,” Senior Citizens League Executive Director Shannon Benton said in a statement.
Efforts to change the federal taxation of Social Security benefits come as the program is facing a trust fund shortfall. Benefits may be reduced within the next decade unless Congress enacts changes sooner, according to projections from Social Security’s trustees.
Because the “big beautiful” law did not include any offsets for the reduced revenue from federal taxes on benefits, it would accelerate the depletion dates, according to the Committee for a Responsible Federal Budget.
In contrast, the You Earned It, You Keep It proposal would extend the Social Security trust funds’ ability to pay benefits in full and on time for 24 years, or until 2058, according to Gallego’s office. That matches an analysis of Craig’s House proposal by Social Security’s chief actuary in April. More