Why Trump’s promise to end taxes on Social Security could face hurdles

Every retiree in the country, I’d imagine, heard President-elect Donald Trump’s promise to eliminate taxes on Social Security benefits, so much so that they might be sitting one day soon at breakfast wondering if they should rush to reduce their tax withholdings for 2025.
But don’t put that one on your to-do list just yet.
We’re talking about fairly significant hurdles for such a change to take place as early as next year, if ever.
“Probably the earliest chance for the Social Security benefits provision to be considered by Congress would be if it is included in a major tax bill introduced in 2025 under budget reconciliation procedures,” said Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting in Riverwoods, Illinois.
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Congress can use the special reconciliation process in some cases to speed up high-priority tax, spending and debt limit legislation — and avoid a filibuster in the Senate.
A long list of soon-to-be-vanishing tax breaks will be a key concern for Congress next year because the many individual provisions in the Tax Cuts and Jobs Act of 2017 — which was pushed when Trump served as the 45th president of the United States — expire at the end of 2025.
Luscombe and other tax professionals warn that retirees and others should not expect a quick change regarding potential taxes on some Social Security benefits.
Luscombe said eliminating taxes on Social Security benefits through the budget reconciliation process would prove to be quite a challenge because the loss of revenue would be substantial and need to be offset.
“With growing concern about deficits and some potential opposition among Republicans to Trump’s main proposed revenue raiser, tariffs, it might be difficult to get all of Trump’s proposed tax breaks included,” Luscombe said.
Or if they all are included, Luscombe said, those tax breaks may be subject to expiration after 10 years as was done in the Tax Cuts and Jobs Act.
“So, it is possible that the elimination of a tax on Social Security benefits could be effective for 2025, but it would have to overcome some of these hurdles for it to happen,” Luscombe said.
Anna Taylor, deputy leader of the tax policy group at Deloitte in Washington, D.C., maintains that the president-elect’s proposal to get rid of taxes on Social Security benefits would not work in a reconciliation package.
If part of a separate bill, there remains a 60-vote threshold to overcome a filibuster in the Senate, which could create other hurdles. As a result, changes involving the taxing of Social Security benefits would require at least 60 Senate votes, including some Democratic support.
“It’s something that could get some Democratic support in the right scenario, but it would depend on what the context was,” Taylor said in a media briefing Tuesday.
It’s key to note here that everyone doesn’t pay taxes on their Social Security benefits. If such a change took place, for example, it would not generate any extra savings for a single retiree whose combined income is around $24,000 a year or less and does not pay taxes on benefits now.
About 40% of people who get Social Security have to pay income taxes on their benefits, according to a report issued by the Social Security Administration.
Unfortunately, it doesn’t take much extra income to get hit with some taxes because income thresholds that trigger the tax on Social Security benefits do not adjust for inflation.
For single filers, the threshold for when you’d have to pay taxes on up to 50% of your Social Security benefits applies when your combined income is between $25,000 and $34,000 a year. Once the combined income is higher, up to 85% of benefits may be taxable.
Couples filing a joint return face taxes on up to 50% of their Social Security benefits if their combined income is between $32,000 and $44,000. If the couple’s combined income is higher than that, up to 85% of benefits would be taxable.
Combined income is your adjusted gross income, plus nontaxable interest, such as interest on certain bonds, plus half of your Social Security benefits received that year.
As a result, someone who is working while collecting Social Security benefits would need to take their earnings from a job into account. The same’s true for someone who is retired and taking taxable withdrawals from traditional 401(k) plans.
Eliminating the complicated tax headache for retirees sounds like a great idea to many. But ending or cutting taxes on Social Security benefits has been proposed — and gone nowhere — a few times before now.
The “You Earned It, You Keep It Act” was introduced by Minnesota Democrat U.S. Rep Angie Craig in 2022, for example, as a way to repeal federal taxes on Social Security benefits for retirees. That tax cut was to be paid for by raising the cap for individuals earning more than $250,000 annually and requiring more Social Security taxes to be paid by those wage earners. The bill also was introduced in 2024.
Under such a plan, these higher wage earners would pay the 6.2% payroll tax on nearly $74,000 more of their wages. Their employers would face the same type of change.
Currently, the Social Security payroll tax cap that applies to both employees and employers is set to increase to $176,100 in 2025 — up from $168,600 in 2024. The increase, based on inflation, was announced in October by the Internal Revenue Service.
Some experts would prefer to see income tax thresholds that apply to Social Security benefits indexed for inflation so that people could earn more in retirement without facing a tax hit.
Taxes paid on Social Security benefits go back into the Social Security system, not the general fund of the U.S. Treasury. Social Security beneficiaries, according to Social Security, do not fully fund their benefits through their payroll taxes.
Trust funds are used to shore up payments to Social Security beneficiaries and they’re projected to become insolvent in 2035, one year later than estimated last year by the Social Security Board of Trustees, based on an annual report filed in May.
Social Security pays out more each year to recipients than it collects each year in revenue — so reducing taxes on benefits without raising money elsewhere could harm the program overall. In 2023, $51 billion for the combined trust funds was raised through taxing benefits.
We’re bound to see all sorts of confusing headlines relating to tax planning for 2025. But right now, it’s hard to make many moves — including eliminating or reducing — your Social Security income tax withholdings for 2025.
We just don’t know what’s likely to happen and when, even with the GOP projected to control the House. The GOP has a narrow majority in the Senate.
An individual can start, change or stop tax withholding at any time by calling Social Security at 800-772-1213. Representatives are available between 8 a.m. and 7 p.m. business days. Or someone can download and print Form W-4V and fax or mail it to their local Social Security office.
Before making any rash moves, though, it may be wise to run this strategy by your tax professional.
Contact personal finance columnist Susan Tompor: [email protected]. Follow her on X (Twitter) @tompor.