In May, the average monthly Social Security benefit for retired workers hit an important milestone by crossing above $2,000 for the first time in the program's history. Though this is a fairly modest monthly payout, Social Security income plays a foundational role for most retirees in helping make ends meet.
Based on an analysis from the Center on Budget and Policy Priorities, Social Security helped pull more than 22 million people above the federal poverty line in 2023, including roughly 16.3 million adults aged 65 and above. What's more, the poverty rate for retirees would soar to an estimated 37.3% if Social Security didn't exist, compared to the 10.1% poverty rate with Social Security income, as of 2023.
For many retirees, getting as much out of Social Security as possible isn't a luxury -- it's a borderline necessity to ensure a rock-solid financial foundation.
President Donald Trump delivering his State of the Union address. Image source: Official White House Photo.
When Trump campaigned on the idea of eliminating the taxation of Social Security benefits, which would allow select recipients to hang onto more of the benefits they receive, his idea garnered overwhelming support from current retirees. But with Trump's One, Big, Beautiful Bill working its way through Congress, it's become clear that the president's vow to shelve the taxation of benefits has been broken and replaced by a concession instead.
Trump's promise to do away with the taxation of benefits was highly popular
On July 31, then-candidate Donald Trump posted on his social media platform Truth Social that "Seniors should not pay tax on Social Security." This message was followed up just months after his Jan. 20 inauguration with a speech during a town hall event that proclaimed:
In the coming weeks and months, we will pass the largest tax cuts in American history -- and that will include no tax on tips, no tax on Social Security, and no tax on overtime. It's called The One, Big Beautiful Bill.
Based on an informal poll from nonpartisan senior advocacy group The Senior Citizens League, well over 90% of retired survey-takers believe Social Security benefits shouldn't be subject to federal taxation.
Taxing a portion of Social Security benefits for select individuals and jointly filing couples was implemented following the signing of the Social Security Amendments of 1983 into law. Beginning in 1984, up to 50% of benefits could be subject to the federal tax rate if provisional income -- adjusted gross income + tax-free interest + one-half of benefits -- surpassed $25,000 for single filers and $32,000 for couples filing jointly. A second tax tier allowing up to 85% of Social Security benefits to be subject to the federal tax rate was added a decade later for individuals and joint filers topping $34,000 and $44,000 in provisional income, respectively.
Aside from the common misconception that this represents a form of double taxation, the reason the tax on benefits is so disliked is because these income thresholds that were introduced in the mid-1980s and mid-1990s haven't once been adjusted for inflation. Due to rising wages and salaries over time, coupled with near-annual cost-of-living adjustments (COLAs), the percentage of senior households subject to this tax has grown from around 10% four decades ago to approximately 50% of all senior households today.
President Trump's One, Big, Beautiful Bill excludes his key Social Security vow (for a good reason)
The president's One, Big, Beautiful Bill, which was narrowly passed by the House of Representatives and is currently being discussed by lawmakers in the Senate, covers a laundry list of tax changes. It would make the personal income tax brackets under the Tax Cuts and Jobs Act (which are on track to sunset on Dec. 31, 2025) permanent, increase the state and local income tax deduction, and provide temporary tax relief for overtime pay and tips for four years to qualified individuals.
But one key provision that's missing is Trump's vow to eliminate the tax on Social Security benefits.
Taxing Social Security benefits has become an increasingly important source of income for America's leading retirement program. US Old-Age, Survivors, and Disability Insurance Trust Fund Income from Taxation of Benefits Receipts data by YCharts.
If you're wondering why this promise failed to pass muster, look no further than the economics supporting America's leading social program.
Social Security has three sources of funding:
- The 12.4% payroll tax on wages and salary up to $176,100 (as of 2025). In 2023, the payroll tax accounted for north of 91% of the income collected.
- The interest income earned on the asset reserves of the Old-Age and Survivors Insurance trust fund (OASI) and Disability Insurance trust fund. This excess capital is required by law to be invested in special-issue, interest-bearing government bonds.
- The taxation of Social Security benefits.
The OASI's asset reserves are forecast to run dry by 2033. Though the OASI is in no danger of bankruptcy or insolvency, it does mean most of Social Security's interest income will go away over the next eight years. Furthermore, depleting the OASI's asset reserves would result in sweeping benefit cuts of up to 21% in eight years for retired workers and survivor beneficiaries, according to the 2024 Social Security Board of Trustees Report.
Removing the tax on benefits at a time when Social Security is financially challenged would be a fiscally poor decision that can expedite the OASI's asset reserve depletion timeline and potentially result in steeper sweeping benefit cuts.
Additionally, President Trump may not have wanted to risk the passage of the One, Big, Beautiful Bill on his "no tax on Social Security" provision.
Amending the Social Security Act requires 60 votes in the upper house of Congress, and it's not even clear if all 53 members of his party in the Senate would vote in favor of such a measure. Rather than risk the potential embarrassment of defeat, the president left this provision out of his flagship bill.
Image source: Getty Images.
Retirees are being given this tax concession instead
Although retirees aren't going to be getting rid of the hated tax on Social Security benefits anytime soon, the president and/or lawmakers did throw a concession into The One, Big, Beautiful Bill that's designed to help retirees who need it most.
Donald Trump's original plan to shelve the tax on benefits would have padded the pocketbooks of Social Security's highest earners -- i.e., the roughly 50% of senior households whose provisional income surpassed the thresholds that trigger federal taxation on a portion of their Social Security income. The concession placed in The One, Big, Beautiful Bill is designed to reward low- and middle-income retirees who need the financial boost.
Keeping in mind that bills are subject to change in Congress, one of the key provisions for retirees in the current bill would temporarily increase the standard deduction for single filers aged 65 and above by $4,000 (and $8,000 for qualifying couples filing jointly) from 2025 through 2028.
The catch is that single filers and joint-filing couples would need to have modified adjusted gross incomes below $75,000 and $150,000, respectively, before a phase-out would kick in. This ensures that low- to mid-income retirees are the ones who'd receive the boost in their standard deduction. This enhanced deduction would come atop the extra $2,000 single filers and $3,200 married filers are already able to deduct if aged 65 and above.
While this beefed-up standard deduction for seniors aged 65 and older is far less, in nominal dollar terms, than what would be seen if the taxation of benefits was eliminated, it does direct the benefit to those who need it most and likely rely on Social Security as a necessary source of income.
