A House Republican tax plan backed by President Donald Trump leaves out a previously floated proposal to eliminate federal taxes on Social Security benefits, opting instead for a temporary $4,000 deduction for seniors. The bill, approved this week by the House Ways and Means Committee, includes several provisions Trump campaigned on, such as eliminating taxes on overtime pay and worker tips, but drops the promise to exempt Social Security benefits from taxation.
"Seniors should not pay taxes on Social Security and they won't," Trump said during an August rally in Harrisburg, Pennsylvania. That commitment is not reflected in the current legislation.
Instead, the bill includes an "enhanced deduction for seniors," offering an additional $4,000 deduction for taxpayers aged 65 and older. The provision would apply from 2025 through 2028 and would be available to both itemizers and standard deduction filers. The deduction phases out for individuals earning more than $75,000 and couples earning over $150,000 in modified adjusted gross income.
White House Assistant Press Secretary Elizabeth Huston said the bill provides a "historic tax break" to seniors receiving Social Security, "fulfilling President Trump's campaign promise to deliver much-needed tax relief to our seniors."
Maria Freese, senior legislative representative at the National Committee to Preserve Social Security and Medicare, said, "I'm sure there are a lot of seniors who would be quite disappointed they will continue to pay taxes" on their benefits.
Roughly 40% of Social Security beneficiaries - about 27 million people - pay federal income tax on those benefits, according to the Social Security Administration. That number has increased over time because the income thresholds set in 1984 were never indexed to inflation. In 1998, only 26% of recipients were taxed, according to the Congressional Budget Office.
Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center, said a median-income retiree earning up to $50,000 annually "may see their taxes cut by a little less than $500 per year" under the proposed deduction. "It's not nothing, but it's also not life changing," Gleckman said.
The cost of the senior deduction is estimated at $200 billion over 10 years if made permanent, compared to over $1 trillion for eliminating taxes on Social Security benefits, according to Garrett Watson, director of policy analysis at the Tax Foundation. "It's actually probably less than 20% of the size of the tax cut that was initially pitched during the campaign," Watson said.
Freese criticized the exclusion of Social Security tax relief, warning that eliminating those taxes would threaten the long-term financial health of the retirement and health programs. According to the Peter G. Peterson Institute, repealing Social Security taxation would accelerate the depletion of its trust fund to 2032, and of Medicare's to 2030. The report warned of "automatic cuts for millions of beneficiaries."
Freese added, "You give some seniors a benefit upfront, but don't tell them that all seniors would run the risk of across-the-board cuts sooner than they would under current law."
