Still Paying Taxes on Social Security: If you’re like most retirees still paying taxes on Social Security, you might’ve heard that former President Trump wants to nix those taxes altogether. Sounds like a sweet deal, right? But here’s the kicker: Trump’s plan might not help you anytime soon, and even if it passes, the biggest winners aren’t who you might think.
Let’s break this down in a friendly, down-to-earth way, and get to the bottom of what’s being promised, what’s being proposed, and what it means for everyday folks.
Still Paying Taxes on Social Security
| Topic | Details |
|---|---|
| Campaign Promise | Eliminate federal income tax on Social Security benefits |
| Current Law | Up to 85% of benefits are taxable based on income level |
| Proposed Change | $4,000 standard deduction for seniors over 65 (not full repeal) |
| Top Beneficiaries | Higher-income retirees ($1,600–$2,400/year in savings) |
| Cost to Gov’t | Estimated $1.5 trillion revenue loss over 10 years |
| Trust Fund Impact | May accelerate depletion from 2034 to 2032 (CBO) |
| Official Resources | SSA.gov, CBO.gov, Kiplinger |
Trump’s push to remove taxes on Social Security sounds great on the surface, but the devil is in the details. The actual plan offers limited relief, mostly helps higher earners, and may speed up financial trouble for the system itself. If you’re still paying taxes on Social Security, don’t expect a miracle overnight. Stay informed, plan wisely, and don’t forget to talk to a professional before making any big moves.
What Are Social Security Taxes?
First up, let’s talk about how Social Security gets taxed in the first place.
If you have other income (like a pension, 401(k), side gig, or your spouse’s income), you might pay tax on up to 85% of your Social Security benefits. That doesn’t mean you lose 85% — it means that much is counted as taxable income.
The rules haven’t changed since the ’80s and ’90s, and thanks to inflation, more seniors are getting taxed every year.
Trump’s Promise vs. Reality
The Promise
Back on the campaign trail, Trump said, plain and simple: he wanted to eliminate federal income taxes on Social Security. That’s a big promise, and for a lot of retirees, it sounded like music to their ears.
The Proposal
But when the policy papers came out? The actual proposal was a $4,000 standard deduction for people 65 and older. It ain’t nothing, but it’s not a full repeal either.
It also phases out for higher-income households, meaning not everyone would even get the full benefit.
Who Actually Benefits?
You’d think low-income retirees would get the most help, but according to the Penn Wharton Budget Model, it’s high-income retirees who see the biggest savings:
- High-income households: $1,625–$2,450/year
- Middle-income households: Around $340/year
- Low-income individuals: About $15/year
So yeah, while it might sound like a populist plan, most of the dollars are going to those who already have the most.
The Bigger Picture: What This Could Cost
Cutting taxes sounds good until you check the receipt.
The Congressional Budget Office estimates that fully eliminating taxes on Social Security would cut $1.5 trillion from federal revenue over the next decade. That’s money that currently helps fund Medicare, Social Security, and other programs.
The Trust Fund Problem
This could also accelerate the Social Security Trust Fund’s depletion, which is already expected around 2034. With this change, that could move up to 2032, meaning future retirees might face cuts.
How the Current Tax System Works
Here’s how to know if you’ll pay taxes on your benefits:
- Add up your adjusted gross income + nontaxable interest + 50% of your Social Security benefits. This is your “combined income”.
- If you’re single and your combined income is over $25,000, you’ll pay taxes.
- If you’re married filing jointly and the number is over $32,000, you’ll pay taxes.
Why This Matters for Everyday People
This isn’t just about a line on your tax return. It’s about your retirement income, your budget, and your healthcare.
If the tax goes away but Social Security gets underfunded? You could face lower benefits in the future. If it stays, you might pay more than you expected.
Retirees are already being squeezed by Medicare premiums, drug costs, housing, food, and inflation. Losing even a few hundred bucks to taxes can hurt.
What Should You Do Now?
Here’s some friendly advice if you’re navigating this:
1. Don’t Count on a Tax Repeal Yet
Congress has to approve any change. Right now, there’s no clear path to a full repeal.
2. Meet with a Tax Pro
Sometimes small changes — like withdrawing from a Roth instead of a traditional IRA — can lower your tax bill.
3. Track Legislative Updates
Keep tabs on Congress.gov or use tools like AARP’s legislative tracker to see where the proposal stands.
4. Stay Vigilant for Scams
Some scammers are already pretending to offer tax relief for seniors. The IRS and SSA will never call and ask for your SSN or payment info over the phone.
FAQs
Q: Are Social Security benefits taxable?
Yes. Up to 85% of your benefits can be taxed depending on your income.
Q: Is Trump’s plan eliminating those taxes?
Not fully. The current proposal includes a $4,000 deduction for seniors over 65.
Q: Who gets the biggest tax break under this plan?
Higher-income retirees. Lower-income people might see little or no savings.
Q: When will this go into effect?
If passed, it could start with the 2025 tax year and run through 2028.
Q: Will this make Social Security run out of money sooner?
Yes. It could move the insolvency date up by about 2 years, from 2034 to 2032.
