End Taxes on Social Security? Popular, Yes, With One Big Downside

Experts say that each bill would substantially reduce many older adults’ tax burdens — but they all come with a catch. Short of complementary reforms, simply cutting taxes on Social Security benefits would advance the program’s projected insolvency date by years.

A number of advocacy organizations have hailed the reintroduction of Massie’s bill, including The Senior Citizens League, which estimates that eliminating taxes on Social Security benefits would save the average senior household about $3,000 annually if implemented in 2025.

While an appealing prospect, it’s also important to highlight the very real downside of earlier Social Security insolvency. Paying taxes on benefits is painful for many Americans, but so would be a benefit cut in the realm of 20% to 30% in the early 2030s.

Outdated Framework 

Whatever one thinks of eliminating taxes on Social Security, the current income threshold framework is “woefully outdated,” according to Edward Cates, chair of The Senior Citizens League.

In the organization’s monthly newsletter for February, Cates observes that the thresholds were put in place in 1984 and were never indexed for inflation. It’s a major factor in taxes on benefits feeling so painful and generating significant public irritation.

Benefit taxes kick in for individuals with combined incomes as low as $25,000, Cates observes. The level for couples isn’t much higher, standing at $32,000.

"The median U.S. household income at the time was $26,430,” Cates recounts. “That’s less than a third of the median household’s income of $80,610 in 2023, the last year for which data is available at the time of this writing. The reality is that the government’s failure to update these thresholds is egregious and that seniors should be paying far less taxes on their benefits.”

If Congress adjusted the 1984 thresholds to 2023 dollars, individuals wouldn’t start paying taxes on their benefits until their combined income reached about $76,000, Cates observes. For couples filing jointly, that figure would be about $98,600.

While upping the thresholds would also have a negative effect on Social Security’s finances, it would be smaller than cutting the taxes outright and would result in a fairer deal for hardworking Americans, Cates argues.

Social Security Taxes Explained

Beneficiaries can pay income taxes on up to 85% of their Social Security benefits, Cates notes, but many people don’t pay any taxes on their benefits, thanks to their modest incomes in retirement.

“Where you end up depends on your earnings and how you file your taxes, single or jointly,” Cates explains. “To understand whether you’ll need to pay taxes on your benefits, it’s important to first understand the concept of combined income.”

For Social Security beneficiaries, Cates notes, “combined income” is defined as 50% of their benefit amount plus any additional income.

“For example, if you earned $24,000 in Social Security benefits for 2024 and an additional $30,000 from your 401(k) withdrawals, your combined income would be $42,000,” Cates says. “Once you have your combined benefit amount, you can use it to find out how much you’ll pay in Social Security taxes.”

People filing taxes as individuals will pay taxes on 50% of their benefits if the combined income exceeds $25,000. That number increases to 85% if combined income exceeds $34,000.

For couples filing jointly, the threshold to pay taxes on 50% of their benefits is $32,000, while the threshold to pay taxes on 85% of benefits is $44,000.

Seniors Favor Reform

The Senior Citizens League's 2025 senior survey is still in the field, Cates says, but the preliminary results among nearly 1,000 retired respondents is that they overwhelmingly support updating the income thresholds.

Some 30% support providing a one-time adjustment to catch the thresholds up to today’s dollars. Then, to solve the problem long term, 73% support implementing an annual adjustment that helps them keep pace with inflation.

“At TSCL, we strongly support both changes and will fight to get them done,” Cates says. “We worked hard to help push the Social Security Fairness Act through Congress before former President Biden signed it on January 5. Moving forward, we’ll continue pushing for similar bills that fix challenges for seniors like unfair taxation.”

Word of Caution

An analysis published by the Committee for a Responsible Federal Budget warns that eliminating taxes on Social Security benefits (as well as tips and overtime) could ultimately cut up to three years off the program's projected solvency. This moves the projected insolvency date to as soon as 2031.

If taxes were eliminated on benefits, tips and overtime, the federal government would eventually need to make a 33% across-the-board benefit cut, the CRFB warns. This projected cut is up from the 23% that the Congressional Budget Office projects under current law, and it would come even sooner.

"Social Security will be only nine years away from insolvency when the next President takes office," the authors note. "If President Trump's campaign agenda were enacted in full, we estimate it would shrink that window by one-third, to only six years."

Ultimately, the authors conclude, the American public must be educated about the pros and cons of altering or outright cutting taxes on Social Security benefits.

Pictured: John Manganaro