Topline
The Social Security Administration (SSA) and President Donald Trump claimed Thursday the president’s domestic policy bill will “eliminate” taxes on Social Security, but that’s not quite accurate: while the bill does give a new tax break for seniors, it’s purposely not tied to their benefits—though the legislation still could speed up Social Security’s insolvency.
President Donald Trump holds a rally at Iowa State Fairgrounds on July 3 in Des Moines, Iowa.
Key Facts
The SSA sent a mass email to Social Security recipients celebrating the passage of the spending bill, according to The Washington Post and various social media reports, which included a press release that claims the bill “eliminates federal income taxes on Social Security benefits for most beneficiaries.”
Trump also repeated claims Thursday evening that the bill eliminates taxes on Social Security—a campaign promise he made before the election—saying at a rally in Iowa that the bill delivered “no tax on Social Security for our great seniors.”
The claims echo a campaign promise of Trump’s that would be hard to actually enact, since changes to Social Security benefits must get 60 votes in the Senate.
In actuality, the bill does not make any direct changes to taxing of Social Security benefits, as senators are not allowed to make changes to Social Security through the reconciliation process, which was used to pass the spending bill and allows budget-focused policies to pass with only a simple majority of votes.
The bill does provide an enhanced tax deduction for senior citizens ages 65 and older, which provides a maximum additional tax deduction of $6,000 through 2028 that’s calculated based on the taxpayer’s income.
Though the group affected by that deduction significantly overlaps with Americans who receive Social Security benefits, the deduction is not tied to Social Security, and will not affect any Social Security recipients younger than age 65, such as people with disabilities.
The White House and Social Security Administration have not yet responded to requests for comment.
What To Watch For
Trump is expected to sign the spending bill into law at 5 p.m. EDT Friday, after the House approved the final version of the bill on Thursday.
How Does The Senior Tax Deduction In Trump’s Bill Work?
The tax deduction in Trump’s policy bill applies specifically to taxpayers who turned 65 during that tax year or are older, and who have a Social Security number. Those taxpayers are given a $6,000 tax deduction per year through 2028 if they make $75,000 or less after other tax deductions, or $150,000 in the case of married couples filing jointly. For those earning more than $75,000 annually, the $6,000 tax deduction goes down by 6% of whatever the taxpayer earns above $75,000, or $150,000 filing jointly. That means if someone earns $100,000 after other deductions, for instance, they would subtract 6% of $25,000 ($1,500) from the $6,000 tax deduction. That math means no one who earns more than $175,000 annually, or $250,000 filing jointly, will receive the deduction.
Can Trump Still Get Rid Of Taxes On Social Security Payments?
Trump has promised to eliminate taxes on Social Security benefits since before the election, but in order to do so he would have to get 60 votes in the Senate, which is unlikely given Republicans’ narrow majority. Trump’s proposal to eliminate Social Security taxes has been controversial, as experts predict it would make Social Security run out of money faster. The nonpartisan Committee for a Responsible Federal Budget (CRFB) projected in 2024 that exempting taxes on benefits would result in Social Security and Medicare receiving $1.6 trillion less in revenue between 2026 and 2035 than if the current rules stayed in place. That would cause Social Security to become insolvent in 2032, followed by Medicare in 2030—one and six years sooner than currently projected, respectively.
How Will Trump’s Policy Bill Impact Social Security?
The spending bill’s provisions will still speed up Social Security’s insolvency, the CRFB projects, even though it doesn’t affect Social Security directly. The legislation will make Social Security and Medicare run out of money in 2032, one year sooner than had previously been projected, the CRFB predicts, based on other tax cuts in the bill that reduce the amount of revenue that’s used to fund Social Security and Medicare.
Which Policy Is Better For Taxpayers?
The policy bill’s senior tax deduction is actually likely more beneficial for many taxpayers than getting rid of taxes on Social Security payments, according to the Tax Foundation, a center-right think tank. While eliminating taxes on Social Security payments would most benefit higher earners, lower-middle-class and middle-class seniors in the 20%-40% income percentiles save more money through the $6,000 tax deduction. The Tax Foundation projects people in those middle percentiles would see their after-tax income go up by between 0.7% and 0.9% after the tax deduction, versus only going up by 0.1% to 0.4% from a tax cut on Social Security payments. The top 20% of earners, who aren’t eligible for the $6,000 tax deduction, meanwhile, will only see their income rise by less than 0.05%, versus the 0.6% bump in after-tax income they could have gotten without taxes on Social Security. The bottom 20% of earners are largely unaffected by either policy, as they already aren’t taxed on Social Security payments and largely have their tax liability wiped out through other deductions before the senior tax deduction would apply.
Key Background
Changes to Social Security have long been considered a “third rail” in politics, and Trump repeatedly vowed ahead of the election that he would not make any changes to people’s Social Security benefits. Since taking office, Social Security has continued to be a source of concern, however, as Trump and former advisor Elon Musk falsely claimed the SSA was subject to widespread fraud and abuse and imposed staffing cuts that reportedly hamstrung the agency. Trump’s vow to eliminate taxes on Social Security payments was one of several tax-related pledges the president made on the campaign trail, along with a “no tax on tips” pledge and a proposal to eliminate taxes on overtime. While the policy bill did not include the Social Security tax provision, it did deliver on Trump’s other campaign promises, exempting tax on tips for up to $25,000 and taxes on overtime for up to $12,500 for single filers. Those policies will both phase out in 2028, like the senior tax deductions.
Correction (7/4): This story has been updated to reflect that the $6,000 is in the form of an additional tax deduction, not a credit.
