For years, policymakers in both parties have raised questions about taxes on Social Security. Still, eliminating them could create problems for future beneficiaries. By Published: April 28, 2025 at 1:44 p.m. ET Share Resize * * * Listen (8 min) Photo: MarketWatch photo illustration/iStockphoto Save money now, lose money in the future — that’s the gamble of supporting a tax cut on Social Security benefits without a thorough plan, experts say. President Donald Trump has mentioned eliminating taxes on Social Security benefits numerous times, including on the campaign trail. The proposal has been applauded by some, as many retirees would receive higher benefits every month. But without a strategy to replace the lost revenue, such a tax cut could speed up the program’s path to insolvency, potentially causing cuts to all beneficiaries’ checks. “Be careful of the Trojan horse,” said Nancy Altman, president of Social Security Works. “If the depletion date is accelerated enough, there could be enough pressure to cut benefits without any fingerprints on it.” It could also potentially change the program, she said, leading to or , the latter of which could result in eligibility requirements for benefits based on earnings or assets. Social Security’s trust funds are running out of money, and trustees of the program that its assets will be exhausted around 2035. Those trust funds are supported with payroll taxes, which come from employees and employers, as well as the taxation of Social Security benefits. Congress has never let Social Security falter, and it’s paid out benefits without fail for almost 90 years. But there are no talks on Capitol Hill right now on how to shore up the trust funds. It is unclear how long an elimination of taxation on Social Security benefits would last. If the government were to stop collecting taxes on the benefits indefinitely, the depletion date for the trust funds could come years sooner — for both Social Security and Medicare, researchers warn. The taxation of benefits is split between Social Security’s two trust funds and Medicare’s trust fund, with about 60% going to Social Security, according to written by Paul Van de Water, a former senior fellow at the Center on Budget and Policy Priorities. The taxes are expected to make up 4% of the income for Social Security’s Old-Age and Survivors and Disability Insurance, or $61 billion, this year. In 2033, the taxation of benefits is expected to make up 6% of that income. (The remaining revenue from these taxes goes to Medicare’s Hospital Insurance, which will be about $43 billion, or 9%, of the trust fund’s income this year.) The Trump administration is also reportedly considering a four-year suspension of taxes on Social Security benefits, overtime pay and tips, according to news site , which focuses on Congress. But even a temporary adjustment could be “harmful,” Andrew Biggs, senior fellow at the right-leaning American Enterprise Institute think tank, wrote in a post on his Little-Known Facts . Temporary cuts are a common budgetary strategy, he argued, but the implications could affect how older Americans approach retirement in a behavioral way. “If Congress eliminates Social Security benefit taxation only for the next four years, middle- and high-income Americans approaching retirement age will have an incentive to claim benefits early in order to access that no-tax window of time,” Biggs wrote. “Someone aged 60, who might otherwise have waited five years to claim benefits at 65, might instead claim at 62 in order to receive a few years of tax-free benefits.” The White House did not respond to a request for comment. ### How Social Security benefit taxation works — and who is at risk About half of the beneficiaries paid income taxes on their benefits in 2021, according to a Congressional Budget Office published last year, using the latest available data. Of the more than $1.42 trillion in income to Social Security retirement, survivor and disability benefits in 2024, $55.1 billion – or roughly 4% – came from the taxation of benefits, the Social Security Administration . ### Financial Literacy Month The market changes minute by minute. Understand how these fluctuations impact your investments with MarketWatch's real-time news and analysis. **See:** Although the notion of cutting taxes on Social Security benefits is supported by both legislators and beneficiaries, not everyone would benefit from the change. Either 50% or 85% of a recipient’s Social Security benefits may be taxable, depending on their filing status and income. The calculation can be a bit convoluted — single taxpayers have to add half of their Social Security income to other income, including pensions, wages, interest, dividends and capital gains, according to the , whereas those who are married filing jointly would take half of the Social Security income for each spouse and then add that to the couple’s other combined income. After adding those figures together, taxpayers can see if part of their benefits may be taxable. There are two rates — 50% and 85% — which Congress hasn’t changed since they were enacted. In other words, higher-income recipients pay the most in taxes on benefits, and they’d reap the most reward from a tax cut. “The ones who benefit most are the wealthiest,” said William Arnone, chief executive officer emeritus of the National Association of Social Insurance. “They have the most to lose.” Still, because the brackets for Social Security benefit taxes have remained the same throughout the decades while inflation and wage growth have continued to increase, the number of people who have to pay income taxes on benefits is rising every year. Of the Social Security benefits paid out, 12.2% were taxable benefits in 1994. In 2022, that figure was 38.2%, according to . “It was supposed to be a small percentage,” said Richard Fiesta, executive director of the Alliance for Retired Americans. “Now we have middle-class retirees being taxed on their Social Security. That’s an issue.” ### What Trump’s proposals could mean for future beneficiaries Trump is not the first person to suggest eradicating taxes on Social Security benefits. The concept has been included in various legislative proposals from both Democrats and Republicans in the last couple of years, including the , the , the and . Trump’s proposal differs, however, because neither he nor his administration has explained how to make up the difference lost to the trust funds. Other proposals suggest using general revenue, which would affect the federal deficit. Eliminating taxes on Social Security benefits, in some ways, has bipartisan support, experts said. Republicans generally like to cut taxes and Democrats generally want to expand Social Security. Depending on how you look at it, this proposal satisfies both objectives. Toeing the line of bipartisan goal-setting is how the taxation of Social Security benefits started, said Kathleen Romig, director of Social Security and disability policy at the Center on Budget and Policy Priorities. “Democrats could call it a tax and Republicans could call it a benefit cut,” she said. “That was the political brilliance of it.” The real tension will come from finding a way to replace the lost income, Social Security Work’s Altman said. “Certainly, most politicians would say get rid of it, at least for the middle class,” she said. “That’s the easy part. The part that is essential is: What are you going to do about losing revenue and the projected shortfall?” #### Partner Center #### Most Popular ##### ##### ##### ##### ##### About the Author Alessandra Malito is a retirement reporter based in New York. She holds the Chartered Retirement Planning Counselor™ and Chartered Financial Consultant® designations. You can follow her on Twitter @malito_ali Show Conversation (6) Advertisement Advertisement Back To Top Copyright © 2025 MarketWatch, Inc. All rights reserved. * UPDATED * MarketWatch * Company * Dow Jones Network Intraday Data provided by and subject to Historical and current end-of-day data provided by . All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements. Financial Literacy Month Starting at $1 per Week ✕

You may get more in Social Security with Trump’s proposed tax cuts — but in 10 years, you might get less

The article discusses the potential impacts of President Trump's proposal to eliminate taxes on Social Security benefits, which could lead to higher benefits for retirees but also risks accelerating the depletion of Social Security's trust funds. Experts warn that without a strategy to replace the lost revenue, there could be future cuts to benefits. The article also explores how changes in tax policies could influence retirement behavior and highlights the complexity of the current tax system on Social Security benefits.