Trump Pledges to Ax Social Security Taxes: Will He Deliver?

It’s likely that most retirees across the U.S. have heard the upcoming President Donald Trump’s pledge to remove taxes on Social Security benefits. Perhaps they’re even considering whether they should adjust their tax withholdings in anticipation for 2025 while having breakfast.

However, it’s too early to make that addition to your checklist.

The possibility of this change occurring as soon as next year is complicated by several significant obstacles.

Mark Luscombe, a principal analyst at Wolters Kluwer Tax & Accounting in Riverwoods, Illinois, explains, “The soonest opportunity for Congress to consider a provision on Social Security benefits would likely be during the introduction of a major tax bill in 2025, following budget reconciliation procedures.”

Congress occasionally uses a special reconciliation process to expedite essential legislation related to taxes, spending, and debt limits — this method also circumvents a Senate filibuster.

Next year, Congress will also need to address numerous expiring tax provisions from the Tax Cuts and Jobs Act of 2017, which was enacted during Trump’s tenure as the 45th U.S. president. These provisions are set to expire at the end of 2025.

Is a Tax-Free Social Security Future Possible in 2025?

According to Luscombe and other tax experts, retirees should not anticipate a swift elimination of taxes on certain Social Security benefits anytime soon.

Luscombe notes that removing taxes through the budget reconciliation process would be a formidable challenge, mainly due to the significant revenue loss it would entail, which would require offsets.

“Given the increasing concerns over deficits and some Republicans’ potential opposition to Trump’s primary proposed revenue source, tariffs, incorporating all of Trump’s tax proposals could prove difficult,” Luscombe remarked.

If they are included, Luscombe suggests, these tax breaks might only be temporary, expiring after 10 years as was the case with the Tax Cuts and Jobs Act.

“Thus, while it’s conceivable that taxes on Social Security benefits could be eliminated by 2025, overcoming these obstacles would be necessary,” Luscombe added.

Anna Taylor, deputy leader of the tax policy group at Deloitte in Washington, D.C., argues that Trump’s proposal to eliminate taxes on Social Security benefits would not be feasible in a reconciliation package.

In a separate bill, overcoming a Senate filibuster would require 60 votes, presenting additional challenges. Therefore, any changes to the taxation of Social Security benefits would need to garner at least 60 Senate votes, including some from Democrats.

“There might be some Democratic support in the right circumstances, but it would depend on the specifics,” Taylor mentioned during a media briefing on Tuesday.

Current Tax Status of Social Security Benefits

It’s important to note that not everyone is currently taxed on their Social Security benefits. For instance, a change wouldn’t benefit a single retiree whose total annual income is around $24,000 or less, as they are not taxed on their benefits currently.

Around 40% of Social Security recipients need to pay income taxes on their benefits, according to a report from the Social Security Administration.

Unfortunately, only a small amount of additional income can trigger these taxes, as the income thresholds for taxing Social Security benefits do not adjust for inflation.

For single filers, the threshold for taxing up to 50% of Social Security benefits starts when combined income is between $25,000 and $34,000 a year. Beyond this, up to 85% of benefits may be taxable.

For couples filing jointly, taxes on up to 50% of their Social Security benefits start when their combined income is between $32,000 and $44,000. Above this range, up to 85% of benefits can be taxed.

Combined income includes your adjusted gross income, plus nontaxable interest and half of your Social Security benefits.

This means that someone employed while receiving Social Security benefits, or a retiree making taxable withdrawals from traditional 401(k) plans, would need to consider this income.

Challenges to Eliminating Taxes on Social Security Benefits

While the idea of removing complex tax burdens for retirees is appealing, attempts to cut or eliminate taxes on Social Security benefits have previously been proposed without success.

For instance, the “You Earned It, You Keep It Act” was introduced in 2022 by U.S. Rep Angie Craig, a Democrat from Minnesota, aiming to eliminate federal taxes on Social Security benefits for retirees. This tax reduction was proposed to be funded by increasing the cap on individuals earning more than $250,000 annually, requiring them to pay more in Social Security taxes. The same bill was reintroduced in 2024.

Under this proposal, these higher earners would be subject to the 6.2% payroll tax on nearly $74,000 more of their income, with their employers facing a similar change.

The cap for Social Security payroll taxes for both employees and employers is set to rise to $176,100 in 2025, up from $168,600 in 2024. This increase, determined by inflation, was announced by the Internal Revenue Service in October.

Many experts would prefer to see the income thresholds for taxing Social Security benefits indexed to inflation, allowing retirees to earn more without facing additional taxes.

The taxes collected on Social Security benefits are reinvested into the Social Security system, not the general U.S. Treasury funds. According to Social Security, beneficiaries do not fully cover their benefits through their payroll taxes alone.

Trust funds help support payments to Social Security beneficiaries, but these are projected to run out by 2035, as per the latest estimates by the Social Security Board of Trustees in their annual report last May. This projection is one year later than previously estimated.

In 2023, taxing benefits contributed $51 billion to the combined trust funds.

While there may be many confusing headlines about tax planning for 2025, it’s currently difficult to make informed decisions, including those about changing your Social Security tax withholdings for 2025.

We still don’t know what will happen, even though the GOP is projected to control the House and holds a narrow majority in the Senate.

Individuals can modify their tax withholding at any time by contacting Social Security at 800-772-1213 during business hours, or by downloading and submitting Form W-4V to their local Social Security office.

However, it’s advisable to consult with a tax professional before making any significant changes.