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Social Security is a key income source for millions of retired Americans.
Social Security benefits are taxed at the federal level, and the thresholds at which taxes on benefits apply are very low.
Benefits are taxed for seniors whose combined income (the total of adjusted gross income, non-taxable interest income and 50% of annual Social Security benefits) exceeds $25,000 at the individual level, or $32,000 at the joint tax-filing level. Although taxing retirement benefits may seem odd, the idea is to use those taxes to ensure the future health of the fund.
But, during his campaign, President Donald Trump said, “Seniors should not pay taxes on Social Security — and they won’t.”
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So far, his promise to fully end taxes on Social Security has not come to fruition. However, Trump did sign the One Big Beautiful Bill Act in July of 2025, which introduced new tax deductions for seniors based on income eligibility. It remains to be seen whether this is the first step to eliminating taxes on Social Security entirely or a post-election compromise.
Regardless, completely eliminating taxes on Social Security could cause a world of harm. Here’s why.
Who pays taxes on Social Security benefits?
Social Security gets most of its funding from payroll tax revenue, according to the SSA, but the program also gets money by taxing some seniors on their monthly benefits.
And the number of seniors who are continuing to pay into the program is rising due to a combination of factors — one of which being that, while Social Security benefits get an annual cost-of-living adjustment, the thresholds for combined income have not been adjusted since 1993.
A 2024 Congressional Research Service report (1) found that the overall share of Social Security benefits paid as federal income taxes rose from 2.2% in 1994 to 6.6% in 2022.
It’s estimated that about 50% of all Social Security recipients pay federal taxes on their benefits, but projections suggest more than 56% of Social Security recipients will pay taxes on benefits in 2050.
That number is likely to keep rising if the combined income thresholds don’t adjust — assuming Trump doesn’t do away with taxes on Social Security altogether like he once suggested.
But to be clear, there’s a reason lawmakers never voted to raise the combined income thresholds. The goal was to eventually make it so that all seniors would pay taxes on their Social Security benefits so that the program could have a stronger ongoing revenue stream.
The problem with getting rid of taxes on Social Security
While eliminating taxes on Social Security might do some good for lower- and moderate-income seniors, ultimately, it’s the high-income earners who stand to benefit the most.
According to an analysis by the Penn Wharton Budget Model, (2) high-income seniors stand to gain up to $100,000 in remaining lifetime welfare as a result of this change. Meanwhile, workers under 30 would be the biggest losers in this game, with households forgoing about $10,000 in lifetime welfare.
Furthermore, eliminating taxes on Social Security could reduce government revenue by $1.5 trillion over 10 years, the Penn study found. And ending taxes on benefits would also deplete Social Security’s trust funds by late 2032. A 2024 report by the Social Security Trustees previously put the combined trust fund depletion date at 2035. (3)
That’s important because once Social Security’s trust funds run out of money, sweeping benefit cuts may become inevitable. Social Security is expected to lose a chunk of its payroll tax revenue as baby boomers retire in droves and an inadequate number of workers enter the labor force to replace them.
The aforementioned Congressional Research Service report found that in 2023, the Social Security trust funds were credited with $50.7 billion from the taxation of Social Security benefits, or 3.8% of the trust funds’ total income. While that’s a relatively small percentage, cutting any sort of revenue could be dangerous, given the program’s impending funding shortfall.
When your financial circumstances hinge upon decisions over which you have no control, it’s important to take matters into your own hands.
Bulking up your savings and investments is a good way to protect yourself from any impending changes to Social Security benefits. Another method is to diversify your portfolio to better resist market shocks by investing in alternative assets.
For instance, with a gold IRA, you can invest in the inflation-hedging precious yellow metal while benefitting from a tax-advantaged account that helps you save for retirement. These accounts can give you the opportunity to hedge against market volatility.
If you’re interested in including more gold in your portfolio, Thor Metals can help you get started.
Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account, which combines the tax advantages of an IRA with the protective benefits of investing in gold, making it an attractive option for those looking to potentially hedge their retirement funds against economic uncertainties.
To learn more, you can get a free information guide that includes details on how to get up to $20,000 in free metals on qualifying purchases.
What’s happening now
Current projections expect about a 23% reduction in Social Security benefits once the program’s trust funds run out of money. Trump’s proposal to end taxes on benefits would increase those cuts to 33% of benefits. The Committee for a Responsible Federal Budget (4) also notes that eliminating taxes on benefits could result in benefit cuts happening as early as 2031.
Because Social Security is already facing an alarming financial shortfall, lawmakers may be hesitant to approve a bill that results in the elimination of taxes on benefits. William McBride, chief economist at the Tax Foundation, told CNBC (5) that there will be some “pretty strict limits on the tax cuts that would be allowed.”
Case in point, in Trump’s One Big Beautiful Bill Act (OBBBA) passed by the House on July 4, Social Security taxes were not eliminated. Instead, the bill introduced a temporary $6,000 tax deduction until 2028 with income-based eligibility limits.
To best understand how these changing policies could impact your retirement, consider working with a certified financial advisor. Advisor.com’s platform can connect you with a fiduciary advisor that best suits your retirement goals. They vet every partner on their platform, and it’s easy to get matched with advisors in your area, too.
How it works is easy: Just input some basic information like your ZIP code and financial goals. From here, Advisor.com will pair you with between one and three advisors. You can then set up a free, no-obligation consultation to see if they’re the right fit for you.
Read more: How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you’ll need a substantial stash of savings in retirement
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Congress Research Services (1); University of Pennsylvania (2); SSA (3); The Committee for a Responsible Federal Budget (4); CNBC (5)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.