Trump wants to end the federal tax on Social Security benefits. Is that possible?
Middle- and upper-income taxpayers who receive Social Security are getting their annual jolt as they file their federal income taxes — a huge percentage of their benefits are being taxed.
Generally, if an individual’s income tops $34,000 or a joint return’s income is more than $44,000 under the federal formula for such calculations, up to 85% of their benefits can be subject to taxation.
President Donald Trump wants to end the federal tax on Social Security. Congressional tax writers will begin considering the idea next month.
“SENIORS SHOULD NOT PAY TAX ON SOCIAL SECURITY!” Trump wrote on his Truth Social site during the 2024 campaign.
A lot of experts warn ending the tax is a bad idea.
Garrett Watson, director of policy analysis at the center-right Tax Foundation, called the proposal “unsound and fiscally irresponsible.”
He said, “There are much better ways to target relief to seniors or lower-income workers than this idea.”
The Penn Wharton business model warned the idea “reduces incentives to save and work while increasing federal debt.”
The policy, it said, “primarily benefits high-income households nearing or in retirement while harming households under 30 and all future generations across the entire income distribution.”
But the nonpartisan Senior Citizens League is warm to the idea.
It believes that Social Security benefits are taxed twice — once when a worker earns them and again “when we need them most,” said Shannon Benton, the League’s executive director.
How Social Security is taxed
Taxation of Social Security benefits depends on a formula that deals with “combined income.” If an individual’s income is less than $25,000 or a joint filer’s income is less than $32,000, they pay no tax on their benefits.
If a single filer’s income is $25,000 to $34,000, the tax applies to as much as 50% of benefits. People with higher incomes are subject to taxes being levied on up to 85% of their benefits.
For joint filers, the 50% level applies to benefits for couples with combined incomes between $32,000 and $44,000. Those with higher incomes face taxes on up to 85% of their Social Security benefit.
About half of the people getting Social Security do not pay federal income tax on their benefits, according to the Congressional Research Service.
But the income levels for the tax rates are static. Social Security benefits, though, are adjusted each year for inflation.
So as the benefits increase, so does the likelihood of more people having to pay tax. CRS said that the reason for the unchanging income levels is that a 1983 law that stabilized the system intended for all benefits to eventually be subject to taxation.
Penn Wharton estimated that more than 60% of “current living households” and 95% of retirees would benefit from eliminating the Social Security tax.
But, it added, “all future generations would be worse off.”
Impact on taxpayers
“Moving away from taxation will help a lot of seniors who are already higher earners with lots of other sources of income,” said the Tax Foundation’s Watson.
The reductions would come with a price that some analysts warn will trigger a crisis. “We find President Trump’s campaign proposals would dramatically worsen Social Security’s finances,” said an analysis by the nonpartisan Committee for a Responsible Federal Budget.
Social Security is projected to become insolvent by 2034. If Trump’s plan was approved, that would happen in 2031, said a committee study.
That would mean a big cut in benefits unless action was taken.
Trump isn’t buying any of that.
When he first proposed the tax plan last year, Karoline Leavitt, then and now his spokeswoman, said, “The so-called experts at CRFB have been consistently wrong throughout the years.
“President Trump delivered on his promise to protect Social Security in his first term, and President Trump will continue to strongly protect Social Security in his second term,” she said.
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