Trump Reiterates Pledge to Eliminate Social Security Taxes in State of the Union
President Donald Trump, in his 2025 State of the Union address, reiterated his pledge to eliminate taxes on Social Security benefits. However, his 'One Big Beautiful Bill' (OBBB) tax reform plan did not include this provision.
Currently, up to 85% of Social Security benefits can be taxed based on an IRS formula known as 'combined income'. Around 40% of recipients now pay taxes on a portion of their benefits, a significant increase from 10% in 1984.
Trump's proposed bonus deduction approach, which offers a $6,000 standard deduction for those 65 and older from 2025 to 2028, would have a mixed impact on retirees' tax burden, mainly benefiting middle-income individuals. This method is estimated to save the federal government approximately $1.25 trillion over ten years compared to fully eliminating Social Security benefit taxes. However, fully abolishing these taxes would reduce federal revenue by an estimated $1.5 to $1.6 trillion in the same period.
The GOP's decision not to include the abolition of Social Security taxes in their 2025 mega-tax reform bill was driven by a desire to maintain funding for Social Security, instead focusing on tax cuts and incentives for economic growth and investment.
While Trump's promise to end federal taxes on Social Security benefits remains unfulfilled, the GOP has proposed a bonus standard deduction for seniors as an alternative. The impact of this change on retirees' tax burden will vary, with middle-income individuals likely to see the most significant benefits.
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