Editor's note: This article has been corrected to reflect that employees and their employers each pay half of the payroll tax.
If you've watched TV or picked up your phone in the last few weeks, you've probably seen at least 100 political ads. Social Security isn't getting as much press as other topics, but it's still a big concern for seniors, especially after the 2025 COLA came in at just 2.5%.
Donald Trump has recently tried to win support from older voters by promising to eliminate the tax on Social Security benefits that some retirees pay on up to 85% of their checks. It makes for a good sound bite, but the repercussions of that move are complicated.
Image source: Getty Images.
All good news in the short term
If you're not familiar, Social Security benefit taxes force seniors to give the IRS a piece of their benefit checks if their provisional income -- that is, their adjusted gross income (AGI), plus any nontaxable interest they've earned on their investments, and half their annual Social Security benefit -- exceeds certain levels for their marital status:
|
Marital Status |
0% of Benefits Taxable if Provisional Income Is Under: |
Up to 50% of Benefits Taxable if Provisional Income Is Between: |
Up to 85% of Benefits Taxable if Provisional Income Exceeds: |
|---|---|---|---|
|
Single |
$25,000 |
$25,000 and $34,000 |
$34,000 |
|
Married |
$32,000 |
$32,000 and $44,000 |
$44,000 |
Source: Social Security Administration.
To be clear, this doesn't mean you lose 50% or 85% of your benefits if you fall into one of the taxable ranges. That just indicates the percentage of your benefits you'll pay ordinary income tax on. For example, if you fall in the 50% taxable benefit range above and are in the 12% income tax bracket, you could pay 12% tax on up to 50% of your Social Security benefits.
That said, these taxes can still take a significant bite out of retirees' checks. The latest Trustees Report revealed that the government took in $50.7 billion from taxing Social Security benefits in 2023, and that number will likely be even higher this year. That's especially difficult for those who rely primarily or exclusively on Social Security.
Donald Trump's plan to eliminate this benefit tax would be a boon to retirees in the short term. This would give many families more money they could use to cover their immediate expenses. It would also let them withdraw less from their personal savings, possibly extending the life of their nest egg. But these benefits would be short-lived.
Social Security's long-term problem
Social Security is already in a serious funding crisis. A recent Congressional Budget Office report indicates that benefit cuts of 24% would be necessary beginning in 2034 if the government does not take steps to secure additional funding for Social Security before then.
Removing Social Security benefit taxes -- one of the program's three sources of funding, the others being interest on trust fund investments and Social Security payroll taxes -- would exacerbate this shortfall. It would increase deficits by $200 billion between now and 2035, according to a recent Committee for a Responsible Federal Budget (CRFB) report. This would accelerate the rate of the trust fund shortfall by over one year.
It's not impossible to fund the program without taxing seniors' Social Security benefits. Theoretically, the government could do this by shifting the burden to workers. The Congressional Budget Office report indicates that if Social Security benefits remain taxable at their current rates, Social Security payroll taxes would have to climb from 12.4% to 16.7% to make up for the shortfall.
If you eliminate benefit taxes, you'd have to increase Social Security payroll taxes by another 0.90%, according to the CRFB, bringing them to 17.6%. This would cost the average worker earning $60,000 per year $5,280 in taxes. That's understandably not going to be a popular decision.
The reason Social Security's funding crisis hasn't been resolved yet is that there are no popular decisions -- not ones that could fully resolve the issue at least. Kamala Harris's proposal to require high earners to pay more in Social Security payroll taxes could partially resolve the issue. But it would only eliminate about half of the projected shortfall. The hard truth is that eliminating the shortfall will cost voters, and politicians aren't eager to decide who or how much.
Promises aren't guarantees
Another factor to consider here is that just because Donald Trump says he'll eliminate Social Security benefit taxes doesn't mean it'll actually happen. As president, he wouldn't have the authority to decide that on his own. Congress would have to pass a law eliminating the tax, so a lot more people would have to get on board for it to happen.
