Trump's Social Security Tax U-Turn — What Retirees Need To Know Now

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On the campaign trail, President Donald Trump promised over and over that he wanted to end taxes on Social Security — a vow that retirees backed. However, in his 'Big Beautiful Bill,' there is no mention of his pledge. Instead, there is a proposal to give seniors over 65 a $4,000 deduction that could help lower taxes, CBS News reported.
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With the House having officially passed the bill on July 3, seniors will not get the tax break Trump guaranteed.
Here's why the elimination of Social Security taxes is not in the bill, and what retirees should know.
While plenty of retirees loved the idea of not paying taxes on Social Security, critics voiced concern over the unrealistic and unaffordable proposal. The Center on Budget and Policy Priorities stated it would be 'unwise' because of the cost factor, and money expert and founder of Be Fluent in Finance Andrew Lokenauth agreed.
'Removing Social Security taxes would've cost the program about $45 billion annually,' he said. 'The program's already facing serious funding issues, and taking away this revenue stream would've been like throwing gasoline on a fire.'
He added, 'From what I've seen working with retirement planning, the Social Security trust fund's gonna run dry by 2033, and removing the tax would've made that happen even faster. The math just didn't work — and I think Trump's team knew it.'
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It's clear Trump broke his promise and is trying to rectify it with a $4,000 deduction called the 'enhanced deduction for seniors,' per CBS. According to Lokenauth, it can help some retirees.
'The temporary standard deduction increase is actually pretty significant for lower-income seniors,' he said. ' I worked with a client last month who'd benefit about $880 annually from this change — she's single, 68 and makes about $40K.' He went on to explain that, 'It's not as generous as eliminating Social Security taxes completely — that could've saved some retirees $2-3K annually — but it's targeted at folks who need it most.'
But the concession wouldn't help everyone on Social Security.
The maximum Social Security benefit in 2025 is $5,108/month, or $61,296 a year.
'If a retiree has even modest supplemental income — from a pension, IRA withdrawals or rental income — they're likely hitting the 85% taxable range, so no tax relief on Social Security means many retirees are handing Uncle Sam more of their fixed income than they expected,' Peter Diamond, a Federally Licensed Tax, Accounting, Real Estate, and Structure and Certified Bankability Expert® explained.
With that in mind, Diamond said most retirees don't have other revenue sources.
'They're not flipping properties or trading options on their phones,' he said. 'They're living off what they saved, and Social Security is often the biggest piece. So when a campaign says you won't be taxed, then quietly drops it later? That's not just a political pivot — it's a punch to the wallet.'
A major thing to note is that if Social Security is your only income, it's likely you won't pay federal tax. 'But once you hit certain income thresholds, the IRS starts dipping its hand in,' Diamond said.
As of 2025, according to T. Rowe Price:
If you're single and your combined income (that's adjusted gross income + nontaxable interest + 50% of your Social Security) is:
Over $25,000, up to 50% of your benefits may be taxable.
Over $34,000, up to 85% may be taxable.
For married couples filing jointly:
Over $32,000, up to 50% is taxable.
Over $44,000, up to 85% is taxable.
According to Lokenauth the income thresholds haven't changed since the 80s, which is 'nuts.'
'Due to inflation, about 50% of seniors now pay these taxes versus just 10% when implemented, and I see this impact every day — middle-class retirees getting pushed into higher tax brackets because these thresholds are never adjusted for inflation,' he explained.
He added, 'From my experience working with retirees, most would rather see those thresholds updated than eliminate the tax entirely. That'd be a more targeted fix that wouldn't threaten Social Security's stability.'
Another important key element to keep in mind regarding Social Security is knowing your strategy, meaning when you plan on collecting your benefits. The longer you wait, the higher monthly payment you'll receive.
'While you become eligible to claim your own Social Security benefits at age 62, that might not be the best filing strategy for you,' said Eric Mangold, CWS Founder of Argosy Wealth Management.
This is especially true for married couples who could gain potential spousal benefits. According to Mangold, 'you should know what filing strategy makes the most sense for you and puts the most money in your pocket.'
He explained, 'How you choose to file can mean the difference of tens of thousands, if not hundreds of thousands, of dollars over the course of your retirement.'
There's no denying that Trump walked back his pledge to end Social Security taxes. He continued to make promises knowing the program is financially struggling, but not including the proposal in the bill was the right choice, according to Lokenauth because it would have worsened the situation.
'The program needs every revenue stream it can get,' he said. 'While Trump's original promise sounded great, it would've accelerated the program's financial problems.'
Lokenauth explained, 'The standard deduction boost is actually smart policy. It helps lower-income seniors who really need it — I've seen firsthand how an extra $500 to $1000 annually can make a real difference for many of my retired clients living on fixed incomes.'
Trump flipped his stance, and retirees will not receive the tax break on Social Security he vowed. While it would have been a win for middle-class retirees, it would have bankrupted the program, according to experts.
Editor's note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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This article originally appeared on GOBankingRates.com: Trump's Social Security Tax U-Turn — What Retirees Need To Know Now