Trump’s Proposal: No More Taxes on Social Security
Former President Donald Trump has proposed eliminating federal taxes on Social Security benefits. If implemented, this change would mean retirees—regardless of income level—would no longer pay any taxes on their Social Security payments.
Currently, up to 85% of Social Security benefits can be taxed depending on a retiree’s income. Trump’s plan aims to completely remove this burden, calling it a “fairness issue” for seniors who have paid into the system all their working lives.
How Social Security Taxes Work
Most retirees are surprised to learn that their benefits can be taxed. If you’re single and earn between $25,000 and $34,000 a year, up to 50% of your benefits may be taxable. If you earn more than $34,000, up to 85% becomes taxable.
For married couples filing jointly, the 50% taxation threshold starts at $32,000, while the 85% rate kicks in above $44,000. These thresholds were set in the 1980s and 1990s—and have never been adjusted for inflation.
A Growing Tax Trap for Retirees
When Social Security taxation was first introduced in 1983, only about 10% of recipients were affected. Today, that number has climbed to nearly 50%.
Because the income thresholds have stayed frozen for decades, more middle-income retirees are pulled into this “stealth tax” trap every year—even those who wouldn’t have been targeted under the original rules.
The Impact on Retirement Planning
Let’s say a retired couple receives $36,000 in Social Security and withdraws another $50,000 from their retirement accounts. Under the current rules, they’re likely to be taxed on 85% of their Social Security benefits.
However, retirees who planned ahead with Roth IRA accounts—which don’t count toward taxable income for Social Security—may avoid this tax entirely. This stark contrast shows why retirement is not just about saving, but about strategy.
The Bigger Problem: Social Security Is Running Out of Money
Trump’s proposal comes at a time when the Social Security trust fund is projected to run dry by 2035. If no reforms are made, the system will only be able to pay about 77% of promised benefits, resulting in a potential 23% across-the-board cut.
Experts warn that eliminating taxes on Social Security—without replacing the lost revenue—could accelerate this insolvency timeline by at least one year.
Why This Debate Matters
Supporters of Trump’s plan call the current tax a “double tax,” since retirees already contributed to Social Security using after-tax income. They argue that taxing benefits again during retirement is unfair.
On the other hand, critics argue that the tax revenue helps keep the program afloat, and removing it could cost the government $1.5 trillion over the next decade.
What Are the Solutions?
Lawmakers in Washington have floated several proposals to fix the issue:
- Eliminate Social Security taxation completely
- Index income thresholds to inflation
- Raise the payroll tax cap
- Implement means testing to reduce benefits for high-income earners
- Push full retirement age further out
Each of these options carries political risks, and for years, Congress has avoided making hard decisions. Doing nothing, however, could bring painful consequences for millions of future retirees.
What Retirees Should Do Now
Retirees should not assume their benefits are tax-free. Financial planners recommend evaluating your income sources—like traditional 401(k)s, IRAs, or Roth accounts—to reduce your taxable income during retirement.
Additionally, those nearing retirement age should consider tax planning before required minimum distributions (RMDs) begin, as those withdrawals can significantly affect how much of your Social Security is taxed.