Eliminating taxes on Social Security benefits has long been a popular political talking point especially among retirees. Former President Donald Trump reignited this discussion with a tax bill that promised relief for seniors. But while the rhetoric sounded like major savings for older Americans, the reality is far more complex.
Instead of wiping out taxes on Social Security benefits altogether, the legislation introduced a limited-time deduction and retained existing income-based tax thresholds. For most retirees, especially those in low-to-middle-income brackets, the actual savings would be minimal. Surprisingly, the biggest financial boost would go to the wealthiest households, while the broader cost could strain Social Security’s future.
What Trump’s Plan Actually Offers – and What It Doesn’t
Former President Trump’s call to eliminate taxes on Social Security benefits drew attention from older Americans looking for financial relief. However, when the “One Big Beautiful Bill Act” (OBBBA) was signed into law, it didn’t completely deliver on that promise. Instead of removing the tax entirely, the bill offered a $6,000 deduction for seniors aged 65 and older — and only between the years 2026 and 2028.
Importantly, this deduction comes with income eligibility rules. While it’s framed as a benefit for retirees, the legislation falls short of the broader reform many had hoped for. The bill also includes provisions from Trump’s broader tax agenda, such as the Senior Citizens Tax Elimination Act, but doesn’t remove the federal income tax on Social Security.
So, what does this really mean for the average retiree? The answer isn’t as straightforward as many might hope.
Who Gains the Most?
While eliminating Social Security taxes might seem like a win for seniors on fixed incomes, the actual benefits are skewed. According to the Tax Policy Center, the real winners would be the wealthiest Americans. If Trump’s proposal to fully eliminate taxes on Social Security was ever passed, households earning between $32,000 and $60,000 would save around $90 per year.
In stark contrast, the top 0.1% of earners — those making $5 million or more annually — would see average tax savings of about $2,500. That’s a massive disparity. In fact, only about 28% of middle-income households would benefit, while less than 1% of lower-income households (earning under $33,000 annually) would see any change at all.
The proposal’s cost is also a concern. Removing Social Security taxes altogether could result in a revenue loss of up to $1.6 trillion over a decade. This shortfall could put added pressure on the already strained Social Security trust funds and accelerate potential cuts to benefits in the future.
Understanding How Social Security Benefits Are Taxed Today
Roughly 68 million Americans receive Social Security benefits, with the average monthly payout estimated around $1,999 in 2025. Surprisingly, most beneficiaries — about 60% — don’t pay any federal income taxes on their benefits because their total income falls below the taxation threshold.
Currently, tax rules depend on your total combined income, including retirement accounts, wages, and Social Security:
For individuals:
- Income between $25,000 and $34,000: up to 50% of benefits may be taxed.
- Over $34,000: up to 85% of benefits may be taxed.
For married couples filing jointly:
- Income between $32,000 and $44,000: up to 50% of benefits may be taxed.
- Over $44,000: up to 85% of benefits may be taxed.
Notably, Supplemental Security Income (SSI) benefits are not taxed. However, some states also tax Social Security income — an area where federal policy has no authority.
More Hype Than Help?
In the end, Trump’s proposed changes may not deliver meaningful tax relief to most retirees. For the majority who already pay no tax on their benefits, there would be no change at all. The biggest tax breaks would go to high-income households, making the reform seem less like a benefit for seniors and more like another win for the wealthy.
And with a projected $1.6 trillion in lost federal revenue, the long-term cost could be severe — potentially speeding up Social Security insolvency and forcing benefit reductions. For lower- and middle-income seniors, the proposal might do more harm than good.
