The Trump administration has “been peddling false and exaggerated claims” about taxation on Social Security benefits, according to a think tank in Washington, D.C.
Newsweek has contacted the White House for comment via email outside regular working hours.
Why It Matters
Earlier this month, President Donald Trump signed the One Big Beautiful Bill Act into law. The legislation creates a new expanded standard deduction for taxpayers aged 65 and up, and it follows Trump’s long-standing promise to nix federal taxes levied on Social Security income.
Trump, the White House and the Social Security Administration (SSA) have promoted the expanded deduction as eliminating taxes on Social Security benefits for almost all seniors. In a June appearance on Fox News’ Sunday Morning Futures, Trump said the bill meant “no tax on tips, no tax on Social Security, no tax on overtime.” However, experts have said the legislation’s touted benefits for seniors are overstated and may hasten the insolvency of Social Security and Medicare trust funds.
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What To Know
The One Big Beautiful Bill Act raises the standard deduction for seniors aged 65 and older by up to $6,000 between 2025 and 2028. While it does not directly alter how Social Security benefits are taxed, it could indirectly reduce the amount of those benefits subject to federal taxation.
According to the Center on Budget and Policy Priorities (CBPP), almost half of seniors already didn’t owe taxes on their Social Security benefits under previous law.
“Since the substantial majority of low- and middle-income seniors didn’t pay income taxes, the new deduction will provide no benefit to these households—doing nothing to help them afford their health care, housing, and other critical living expenses,” the think tank wrote in a report published on Monday.
Though the deduction begins to phase out for individuals with incomes over $75,000 and for married couples earning more than $150,000, the Tax Policy Center found that seniors with incomes between $80,000 and $270,000—representing a quarter of people over 65—receive almost two-thirds of the deduction’s benefits.
While higher-income seniors are the primary beneficiaries of the tax break, most won’t see a complete elimination of taxes on Social Security income under the new law, according to the CBPP.
“For the vast majority of these higher-income taxpayers, the tax on their Social Security benefits would be reduced but not eliminated,” the think tank reported.
The deduction also excludes beneficiaries under age 65. Social Security beneficiaries can begin collecting at 62, while those collecting survivor benefits can claim even earlier.
Both the SSA and the White House have touted the benefits of the legislation. Citing analysis from the Council of Economic Advisers, the White House said 88 percent of all seniors who received Social Security would pay “NO TAX on their Social Security benefits,” adding that the Senate proposal’s $6,000 senior deduction was “estimated to benefit 33.9 million seniors, including seniors not claiming Social Security.”
Prior to the bill being signed by the president, the SSA sent an email celebrating the legislation’s passage through Congress. The email said 90 percent of Social Security beneficiaries would “no longer pay federal income taxes on their benefits” and that the bill would provide “meaningful and immediate relief to seniors who have spent a lifetime contributing to our nation’s economy.”
The CBPP report also warned that the new law could worsen the financial outlook of Social Security and Medicare. The think tank said the tax cuts would reduce the revenue generated from Social Security benefit taxation by about $30 billion annually, accelerating insolvency of both trust funds to 2032—a year earlier than previously projected.
According to the latest Social Security Trustees report, the program’s two trust funds—the Old-Age and Survivors Insurance and Disability Insurance funds—when combined are projected to reach insolvency by 2034. At that point, benefits would rely entirely on incoming payroll taxes, resulting in an automatic cut of about 21 percent unless Congress intervened.
What People Are Saying
The Center on Budget and Policy Priorities: “The Trump Administration has been peddling false and exaggerated claims about the harmful Republican megabill’s effects on the taxation of Social Security benefits, including in a blast email from the Social Security Administration. The new law doesn’t help most low- and middle-income seniors, and it depletes the Social Security trust funds faster. Moreover, the Administration’s misleading claims shouldn’t distract from how the law’s deep cuts to health care and food assistance will leave millions of seniors with low incomes worse off.”
The White House said in news release on July 21: “The largest tax cut in history for working- and middle-class Americans—including No Tax on Tips, No Tax on Overtime, and No Tax on Social Security—is now the law of the land, along with unprecedented tax relief for small businesses, farmers, workers, and families.”
What Happens Next
The expanded deduction for seniors is set to take effect beginning with the 2025 tax year and expire after 2028 unless extended by future legislation.
