Tired of Paying Taxes on Social Security? Here's How Likely That Rule Is to Change

Personal Finance

Published: March 15, 2025 1:52 pm

Key Points

Many seniors today pay taxes on their Social Security benefits.
President Trump has proposed eliminating those taxes.
Since that could cause major repercussions, seniors should not expect those taxes to go away anytime soon.
The right cash back credit card can earn you hundreds, or thousands of dollars a year for free. Our top pick pays up to 5% cash back, a $200 bonus on top, and $0 annual fee. Click here to apply now (Sponsor)

Imagine being retired and having to adjust to living on a fixed income. It may not be the easiest thing to go from a steady paycheck to a combination of modest IRA or 401(k) withdrawals and a monthly Social Security check. But that’s the situation a lot of retirees end up in.

Not everyone ends their career with millions of dollars banked. Even if you have, say, a $300,000 nest egg, which is nothing to scoff at (and more than the median balance among Americans aged 65 to 74), you may end up in a situation where the bulk of your senior income comes from Social Security. And in that scenario, you’d probably be counting on keeping those monthly benefits in full.

But unfortunately, that’s not a given. Social Security benefits are not only taxable, but taxable for people with relatively low incomes.

President Trump, however, has pledged to change that. As part of his campaign, he stated repeatedly that he felt that no one should have to pay taxes on Social Security.

But will his plan to get rid of those taxes succeed? That’s pretty questionable at this point.

The problem with eliminating taxes on Social Security

Social Security gets most of its revenue from payroll taxes. But it also gets revenue from the taxes seniors pay on their monthly benefits. And right now, Social Security needs all the revenue it can get.

In the coming years, the program is facing a financial shortfall as baby boomers retire in droves and start claiming benefits at the same time. The rate of replacement workers is expected to fall short, which means Social Security will be seriously strained, to the point where it will need to tap its trust funds to keep up with scheduled benefits.

Social Security can hang on for a while. But once those trust funds run out of money, the program may have to cut benefits.

Recent projections have the Social Security trust funds running dry in 2035. But that timeline could certainly wiggle. And if taxes on Social Security benefits are eliminated, it could push the program’s insolvency date up by a few years, resulting in benefit cuts sooner than anyone is ready for.

It’s for this reason that Trump’s plan to eliminate taxes on Social Security benefits is unlikely to get voted in by Congress. Doing so could all but guarantee that Social Security cuts are coming. And that’s a situation lawmakers are hoping to avoid.

How to cope with taxes in retirement

The taxes you pay on your Social Security benefits may not even be the only taxes you’re on the hook for. If you have your savings in a traditional IRA or 401(k), withdrawals are taxable, too. So is interest income in your bank account and any dividend or interest payments you receive from a taxable brokerage account.

That’s why it’s a good idea to sit down with a financial advisor or tax professional ahead of retirement and talk through some tax mitigation strategies. A professional can help you find ways to lower that burden in retirement, no matter how much money you have or expect to have. And if you’re already retired and frustrated by taxes, it’s not too late to get help, either.

Are You Still Paying With a Debit Card?

The average American spends $17,274 on debit cards a year, and it’s a HUGE mistake. First, debit cards don’t have the same fraud protections as credit cards. Once your money is gone, it’s gone. But more importantly you can actually get something back from this spending every time you swipe.

Issuers are handing out wild bonuses right now. With some you can earn up to 5% back on every purchase. That’s like getting a 5% discount on everything you buy!

Our top pick is kind of hard to imagine. Not only does it pay up to 5% back, it also includes a $200 cash back reward in the first six months, a 0% intro APR, and…. $0 annual fee. It’s quite literally free money for any one that uses a card regularly. Click here to learn more!

Flywheel Publishing has partnered with CardRatings to provide coverage of credit card products. Flywheel Publishing and CardRatings may receive a commission from card issuers.