August 19, 2025
During his presidential campaign, Donald Trump made a number of promises related to taxes. He pledged to eliminate taxes on tips, overtime, and Social Security, and make car loan interest tax deductible. After he returned to the White House, Trump continued to say that there will be "no tax on Social Security benefits for seniors."
In the One Big Beautiful Bill Act (OBBBA) that President Trump signed into law on July 4, for tax years 2025 through 2028, qualified tips up to $25,000 are tax deductible, overtime pay (the "half" portion of "time-and-a-half" compensation) up to $12,500 ($25,000 for joint filers) is tax deductible, and interest on car loans up to $10,000 is tax deductible. However, these new tax deductions phase out for taxpayers with higher incomes.
Missing in the OBBBA is the elimination of taxes on Social Security.
Under current tax law, up to 50 percent of Social Security benefits are taxed on income between $25,000 and $34,000 ($32,000 and $44,000 for married filing jointly), and up to 85 percent of Social Security benefits are taxed if one's income is over $34,000 ($44,000 for married filing jointly). For purposes of Social Security taxation, income is defined as adjusted gross income plus nontaxable interest plus half of Social Security benefits. Congress has never indexed for inflation the threshold at which benefits are subject to taxation.
The taxes on Social Security are all still in place. Yet, the Trump administration is claiming that the OBBBA "delivers on President Trump's promise of No Tax on Social Security."
So, how can the Trump administration make that claim? What really happened to no tax on Social Security benefits?
The OBBBA institutes, for tax years 2025 through 2028, "a new bonus deduction of $6,000 for seniors age 65 and older ($12,000 for married seniors)." This deduction "is on top of the standard deduction and the current-law additional deduction for seniors." The standard deduction for tax year 2025 is $15,000 ($30,000 for married filing jointly) and the senior deduction is $2,000 ($3,200 for married filing jointly). The new senior bonus deduction phases out at a 6 percent rate for taxpayers with modified adjusted gross income over $75,000 ($150,000 for married filing jointly).
According to the Trump administration,
The new $6,000 senior deduction is estimated to benefit 33.9 million seniors, including seniors not claiming Social Security. The deduction yields an average increase in after-tax income of $670 per senior who benefits from it.
51.4 million seniors - 88% of all seniors receiving Social Security income - will pay no tax on their Social Security.
This amounts to the largest tax break in American history for our nation's seniors.
Since taxes on Social Security are a funding source for the program, the OBBBA, which was a budget reconciliation bill, cannot recommend changes to Social Security.
So, although Trump's big beautiful bill does not eliminate taxes on Social Security, it does provide a temporary new deduction that will lower the taxable income of seniors and therefore lower their adjusted gross income that their income tax is figured on.
So, what should Congress do? Should taxes on Social Security actually be eliminated? Of course they should, but not because they are taxes on Social Security.
Most Americans who pay taxes are quadruple-taxed on their income in addition to all of the other taxes they have to pay. There is income tax, Social Security tax, Medicare tax, and, in over 40 states, there is state income tax. All of these taxes are on the same income.
High-income taxpayers are hit even harder. For taxpayers with adjusted gross incomes over $200,000 ($250,000 for married filing jointly), there is the additional Medicare tax of.9 percent and the additional 3.8 percent surtax on net investment income. Certain tax deductions and credits begin to be phased-out as one's income rises, resulting in the payment of higher taxes. There is also the estate tax.
Then there are federal excise taxes on fuel, airline tickets, tobacco, alcoholic beverages, firearms, ammunition, and indoor tanning services. And finally, as explained above, Social Security benefits may be subject to taxation.
So, yes, of course, taxes on Social Security should be eliminated, but only because excise taxes, payroll taxes, estate taxes, and income taxes should be eliminated. None of these taxes are necessary for the government to carry out its constitutional functions.