General
As the Republican-led Congress pushes forward with President Donald Trump’s landmark 2025 mega tax bill, you may have noticed that a key campaign promise is, so far, noticeably absent.
During last year’s presidential campaign, Trump made several promises. One for retirees was that he would end federal taxes on Social Security benefits.
In several rallies and interviews, then-candidate Trump assured older adults that “SENIORS SHOULD NOT PAY TAX ON SOCIAL SECURITY!”
After being elected for his second term, he repeated the pledge in his 2025 State of the Union address: “I’m calling for no tax on tips, no tax on overtime, and no tax on Social Security benefits for our great seniors.”
Yet, as the Republican-led Congress works to advance Trump’s sweeping tax reform bill, dubbed the One Big Beautiful Bill Act (OBBBA), no mention is made of eliminating taxes on Social Security benefits.
So, why haven’t lawmakers cut taxes on Social Security in the proposed legislation, and what are they offering instead? Here’s more of what you need to know.
Tax on Social Security benefits
Contrary to popular belief, Social Security benefits aren’t necessarily tax-free. Up to 85% of SS income can be subject to tax depending on an IRS formula known as “combined income” (It’s sometimes also called “provisional income.”)
- “Combined income” includes half of Social Security benefits, adjusted gross income (AGI), and any tax-exempt interest.
- If combined income exceeds $25,000 for individuals or $32,000 for couples, up to 50% of benefits can be taxed; above $34,000 (individuals) or $44,000 (couples), up to 85% can be subject to tax.
And…those thresholds haven’t been adjusted for inflation since the 1980s. So, as Social Security benefits and other incomes rise, more retirees each year find that their Social Security benefits are subject to tax to some extent.
According to the Social Security Administration, about 40% of recipients pay taxes on a portion of their benefits, compared to only 10% back in 1984.
The highest earners face the largest tax bills, but for most retiree households with lower income, Social Security benefits remain untaxed.
Why was a SS tax cut left out of Trump’s ‘big bill’?
There are several key reasons why the GOP mega reconciliation bill omits the Social Security tax repeal.
Budget Rules. First, Senate budget reconciliation rules prohibit significant changes to Social Security programs within a tax bill. One key hurdle is the “Byrd Rule,” named after former Sen. Harry Byrd of Virginia.
- The rule generally prohibits certain provisions in reconciliation bills.
- Essentially, while Congress can change various spending and revenue measures, it’s limited in its ability to alter Social Security benefits or funding.
So, the Byrd Rule makes it procedurally unfeasible to include an SS tax repeal in Trump’s “big bill.”
Fiscal Impact: Eliminating taxes on Social Security benefits would reduce federal revenue by an estimated $1.5 to $1.6 trillion over a decade, according to a Penn Wharton Budget Model. Some analyses suggest that such a loss could accelerate the depletion of the Social Security trust fund.
It’s also worth noting that, fresh from the June 2025 Trustees Report, the combined Social Security Trust Funds are now projected to be depleted by 2034, one year earlier than previously forecast.
At that point, incoming payroll taxes would only cover about 80% of scheduled benefits. That could lead to reduced payouts for all beneficiaries unless Congress acts.
The alternative: Bonus 2025 standard deduction over 65?
Rather than eliminating taxes on Social Security, as Kiplinger has reported, the House GOP’s main offering is a bonus $4,000 standard deduction for those 65 and older. (It’s worth noting that in its version of Trump’s tax bill, the U.S. Senate has proposed an even higher bonus deduction boost of $6,000.)
Regarding the proposal, House Ways and Means Committee Chairman Rep. Jason Smith (R-Mo.) said in a statement, “Republicans are keeping President Trump’s promise to help seniors afford the cost of living through an expanded senior deduction in The One, Big, Beautiful Bill.”
Here are some key points on how the enhanced extra standard deduction would work if approved by Congress and the President.
- The “bonus deduction” would be available from 2025 to 2028
- The full deduction would be available to those with income up to $75,000 (single filers) and $150,000 (joint filers), then would phase out above those levels and completely phase out at $175,000.
- Eligible filers would be able to take the bonus tax deduction whether itemizing or not.
- The bonus tax relief would stack on top of the existing extra standard deduction for those 65 and older.
Tax impact on retirees
But it’s important to note that the impact of any enhanced bonus standard deduction on people’s Social Security tax burden would be mixed. Here’s why:
For Lower-Income Retirees: Many already pay little or no federal income tax on their Social Security benefits, so the extra deduction may not offer much additional relief.
For Middle-Income Retirees: The deduction could help reduce taxable income enough to lower or eliminate taxes on Social Security benefits, especially for those close to the income thresholds. If the deduction brings a retiree’s combined income below the taxable threshold, they may see a reduction in the portion of benefits subject to tax.
Example: Consider a 67-year-old single retiree with $25,000 in Social Security and $18,000 from a retirement account. To determine if any Social Security is taxable, the IRS looks at “combined income.” In this case, that’s $12,500 (half of $25,000) plus $18,000, totaling $30,500.
- This fictional retiree’s combined income is just above the $25,000 threshold where Social Security benefits start to be taxed.
- Under normal circumstances, a portion of their benefits would be included in taxable income.
However, if the $4,000 bonus House GOP deduction is available, it would reduce their taxable income, potentially lowering their combined income calculation as well.
With the bonus deduction and the $17,000 standard deduction proposed for 2025, their taxable income could drop enough to bring their combined income below the threshold or at least reduce how much of their Social Security is taxed.
For Higher-Income Retirees: Those with incomes above the phase-out limits (individuals with adjusted gross income (AGI) above $75,000 and couples above $150,000) will see little or no benefit from the deduction. As a result, their Social Security benefits will continue to be taxed at current rates.
Example: Take a 67-year-old retiree with $50,000 in Social Security and $100,000 from a retirement account.
- To calculate the taxes on Social Security, you add half of their Social Security ($25,000) to their other income, for a combined income of $125,000.
- Because that is above the IRS threshold, 85% of their Social Security, $42,500, would be taxable under current law.
- But if Social Security taxes were repealed, that $42,500 would no longer count as taxable income, lowering their tax bill.
With the House’s $4,000 bonus deduction for seniors, this retiree wouldn’t benefit because the deduction phases out at higher incomes.
For 2025, they would still receive the increased standard deduction for singles age 65 and older, which is currently $17,000 ($15,000 standard plus $2,000 age addition).
*The House proposal would increase the base standard deduction, but this calculation relies on current law.
Trump One Big Beautiful Bill: Bottom line
Despite campaign promises, the 2025 proposed tax bill hasn’t delivered a Social Security tax cut. Instead, both the House and Senate GOP versions of Trump’s bill offer a temporary boost in the form of a bonus deduction for older adults.
In a report from the Bipartisan Policy Center, the proposed bonus deduction is described as “likely to benefit people who earn modest incomes,” but “the lowest-earning seniors already pay no federal income taxes, so they wouldn’t benefit. The highest earners make too much to qualify.”
But ending federal taxes on Social Security benefits would reduce government revenue by about $1.45 trillion over ten years. In comparison, the House GOP’s proposed $4,000 senior deduction would cost roughly $200 billion in the same period. So, according to several policy analyses, the deduction approach would save the federal government approximately $1.25 trillion compared to fully eliminating Social Security benefit taxes
As the bill moves through the Senate, the debate over how best to provide targeted tax relief to older adults remains unsettled. So, stay informed.
All contents copyright 2025 The Kiplinger Washington Editors, Inc. Distributed by Tribune Content Agency, LLC
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