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President Donald Trump\u2019s campaign promise, \u201cSeniors should not pay taxes on Social Security \u2014 and they won\u2019t,\u201d was upheld in the One Big Beautiful Bill Act, which introduced new tax deductions for retirees based on income eligibility \u2014 sort of.<\/p>\n
While the President has declared that Social Security benefits are now tax-free many times, the reality of what the OBBBA actually allows is rather different. Senate budget reconciliation rules prevent sweeping changes to the Social Security program, meaning that taxpayers above the age of 65 will get a temporary $6,000 tax deduction between 2025 and 2028, subject to income-based eligibility thresholds (1).<\/p>\n
In his State of the Union speech in February 2026, the President doubled down (2), stating, \u201cAll Democrats \u2026 wanted large-scale tax increases to hurt the people instead. But we held strong.\u201d<\/p>\n
\u201cAnd with the great Big Beautiful Bill, we gave you no tax on tips, no tax on overtime and no tax on Social Security for our great seniors,\u201d he explained.<\/p>\n
Some of these provisions are for working Americans, so what do retirees actually get?<\/p>\n
The Enhanced Senior Deduction could reduce your overall tax bill, but like with many things, there\u2019s a catch. You can only claim the full $6,000 if your modified adjusted gross income (MAGI) is less than $75,000 for an individual, or $150,000 for a couple (3).<\/p>\n
The deduction begins to phase out with income levels beyond this, however, and it is not available at all for those individuals whose income is more than $175,000, or $250,000 for a couple.<\/p>\n
One bright spot? All people over 65 years of age are eligible to apply, even if they don\u2019t claim Social Security yet.<\/p>\n
So, while the President\u2019s repeated claims aren\u2019t exactly true, there is one good reason why retirees ought to be paying taxes in the first place: Completely eliminating taxes on Social Security could cause significant harm to the program.<\/p>\n
Here\u2019s why.<\/p>\n
Before looking for explanations, it\u2019s a good idea to look at how Social Security benefits are taxed now.<\/p>\n
The thresholds at which taxes on benefits apply are very low: Benefits are taxed for retirees whose combined income (the total of adjusted gross income, non-taxable interest income and 50% of annual Social Security benefits) exceeds $25,000 at the individual level, or $32,000 at the joint tax-filing level.<\/p>\n
Although taxing retirement benefits may seem odd, the purpose of the taxes is clear \u2014 those funds ensure the future of the program.<\/p>\n
However, the new $6000 reduction isn\u2019t likely to benefit those who need it most: low-income retirees who already pay low or no taxes on their benefits, according to the Institute on Taxation and Economic Policy (4).<\/p>\n
Read More: I\u2019m almost 50 years old and don\u2019t have retirement savings. Is it too late?<\/a><\/p>\n Social Security gets most of its funding from payroll tax revenue, according to the U.S. Social Security Administration (SSA). But the program also gets money by taxing some retirees on their monthly benefits.<\/p>\n And the number of retirees who are continuing to pay into the program is rising. A 2024 Congressional Research Service report (5) found that the overall share of Social Security benefits paid as federal income taxes rose from 2.2% in 1994 to 6.6% in 2022.<\/p>\n In fact, it\u2019s estimated that about 50% of all Social Security recipients pay federal taxes on their benefits, but their projections suggest more than 56% of Social Security recipients will pay taxes on benefits in 2050.<\/p>\n That number is likely to keep rising due to a combination of factors \u2014 one of which is that while Social Security benefits get an annual cost-of-living adjustment, the thresholds for combined income have not been adjusted since 1993.<\/p>\n If these thresholds don\u2019t adjust, the numbers will keep going up \u2014 assuming Trump doesn\u2019t do away with taxes on Social Security altogether, like he once suggested (6).<\/p>\n But to be clear, there\u2019s a reason lawmakers never voted to raise the combined income thresholds. The goal was to eventually make it so that all retirees would pay taxes on their Social Security benefits so that the program could have a stronger ongoing revenue stream.<\/p>\n The question remains, who would benefit from cutting Social Security benefits?<\/p>\n According to an analysis by the Penn Wharton Budget Model (7), high-income retirees would stand to gain up to $100,000 in remaining lifetime welfare if taxes on Social Security were eliminated. Meanwhile, workers under the age of 30 would be the biggest losers in this game, with households forgoing about $10,000 in lifetime welfare.<\/p>\n Furthermore, eliminating taxes on Social Security could reduce government revenue by $1.5 trillion over 10 years, as projected by the Penn Wharton Budget Model. It also projects that ending taxes on benefits would deplete Social Security\u2019s trust funds by late 2032, while the Committee for a Responsible Federal Budget suggests it could result in benefit cuts happening as early as 2031 or 2032 (8, 9). Meanwhile, the SSA itself projects that the trust fund for the program will be insolvent by 2033, according to the 2025 Trustees Report (10).<\/p>\n No matter which projection you believe, this is bad news: If Social Security reaches the insolvency point sooner, cuts to benefits could not only hurt today\u2019s retirees but also cause major hardships for working Americans in the future.<\/p>\n That\u2019s important because once Social Security\u2019s trust funds run out of money, sweeping benefit cuts may become inevitable. Social Security is expected to lose a chunk of its payroll tax revenue as baby boomers retire in droves and an inadequate number of workers enter the labor force to replace them.<\/p>\n The aforementioned Congressional Research Service report found that in 2023, the Social Security trust funds were credited with $50.7 billion from the taxation of Social Security benefits, or 3.8% of the trust funds\u2019 total income.<\/p>\n While that\u2019s a relatively small percentage, cutting any sort of revenue could be dangerous, given the program\u2019s impending funding shortfall.<\/p>\n If you\u2019re starting to worry about how these events could affect your retirement, you might want to consider working with a certified financial advisor.<\/p>\n Finding the right advisor is simpler than ever now with Advisor.com<\/a>. Their platform connects you with licensed financial professionals in your area who can provide personalized guidance about your retirement plans.<\/p>\n A professional advisor<\/a> can also help you determine how many years you have left to invest before retirement and assess your comfort level with market fluctuations \u2014 two key factors in building the right asset mix for your portfolio.<\/p>\n Through Advisor.com, you can schedule a free, no-obligation consultation<\/a> to discuss your retirement goals and long-term financial plan.<\/p>\n Even with the help of a professional, when your financial circumstances hinge upon decisions over which you have no control, it\u2019s sometimes important to take matters into your own hands.<\/p>\n Bulking up your savings and investments is a good way to protect yourself from any impending changes to Social Security benefits.<\/p>\n In fact, many baby boomers are relying on real estate purchased in their younger years to fund their retirements.<\/p>\n According to data from Clever Real Estate, while about 61% of boomers plan to never sell their homes, about a quarter (24%) of homeowners in this age group plan to sell their homes in the next 10 years, or even earlier (11).<\/p>\n However, selling the old homestead isn\u2019t the only way that you can tap into the real estate market.<\/p>\n That\u2019s where mogul comes in. This real estate investment platform offers fractional ownership in blue-chip rental properties<\/a>, which gives investors monthly rental income, real-time appreciation and tax benefits \u2014 without the need for a hefty down payment or late-night tenant calls.<\/p>\n Founded by former Goldman Sachs real estate investors, the mogul team handpicks the top 1% of single-family rental homes nationwide for you. Simply put, you can invest in institutional quality offerings for a fraction of the usual cost.<\/p>\n Each property undergoes a vetting process, requiring a minimum 12% return even in downside scenarios. Across the board, the platform features an average annual IRR of 18.8%. Their cash-on-cash yields, meanwhile, average between 10% to 12% annually. Offerings often sell out in under three hours<\/a>, with investments typically ranging between $15,000 and $40,000 per property.<\/p>\n Every investment is secured by real assets, not dependent on the platform\u2019s viability. Each property is held in a standalone Propco LLC, so investors own the property \u2014 not the platform. Blockchain-based fractionalization adds a layer of safety, ensuring a permanent, verifiable record of each stake.<\/p>\n Getting started is a quick and easy process. You can sign up for an account and then browse available properties<\/a>. Once you verify your information with their team, you can invest like a mogul in just a few clicks.<\/p>\n While the National Association of Realtors reports that many baby boomers are tapping into their home equity or substantial savings to finance the purchase of a rental property (12), the rental market for larger, multifamily buildings may offer more stable returns with less work.<\/p>\n If diversifying into multifamily and industrial rentals appeals to you, you could consider investing with Lightstone DIRECT<\/a>, a new investing platform from the Lightstone Group, one of the largest private real estate companies in the country with over 25,000 multifamily units in its portfolio.<\/p>\n Since they eliminate intermediaries \u2014 brokers and crowdfunding middlemen \u2014 accredited investors with a minimum investment of $100,000 can gain direct access to institutional-quality multifamily opportunities. This streamlined model can help reduce fees while enhancing transparency and control.<\/p>\n And with Lightstone DIRECT, you invest in single-asset multifamily deals alongside Lightstone \u2014 a true partner \u2014 as Lightstone puts at least 20% of its own capital into every offering. All of Lightstone\u2019s investment opportunities undergo a rigorous, multi-stage review before being approved by Lightstone\u2019s Principals, including Founder David Lichtenstein.<\/p>\n How it works is simple: Just sign up with your email, and you can schedule a call with a capital formation expert<\/a> to assess your investment opportunities. From here, all you have to do is verify your details to begin investing.<\/p>\n Founded in 1986, Lightstone has a proven track record of delivering strong risk-adjusted returns across market cycles with a 27.6% historical net IRR and 2.54x historical net equity multiple on realized investments since 2004. All told, Lightstone has $12 billion in assets under management \u2014 including in industrial and commercial real estate.<\/p>\n As such, even if multifamily rentals don\u2019t appeal to you, Lightstone could still serve you well as an investment vehicle for other real estate verticals.<\/p>\n Get started today with Lightstone DIRECT<\/a> and invest alongside experienced professionals with skin in the game.<\/p>\n To better resist market shocks, another method is to diversify your portfolio by investing in alternative assets.<\/p>\n For instance, with a gold IRA, you can invest in the inflation-hedging precious yellow metal while also benefiting from a tax-advantaged account that helps you save for retirement. These accounts can give you the opportunity to hedge against market volatility.<\/p>\n If you\u2019re interested in including more gold in your portfolio, Thor Metals<\/a> can help you get started.<\/p>\n Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account, which combines the tax advantages of an IRA with the protective benefits of investing in gold, making it an attractive option for those looking to potentially hedge their retirement funds.<\/p>\n To learn more, you can get a free information guide<\/a> that includes details on how gold can help protect and preserve your wealth for retirement.<\/p>\n Join 250,000+ readers and get Moneywise\u2019s best stories and exclusive interviews first \u2014 clear insights curated and delivered weekly. Subscribe now.<\/a><\/p>\n We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines<\/a>.<\/p>\n SmartAsset (1<\/a>); PBS (2<\/a>); ABC7 Bay Area and San Francisco (3<\/a>); Institute on Taxation and Economic Policy (4<\/a>); Congressional Research Service (5<\/a>); CBS News (6<\/a>); Penn Wharton Budget Model (7<\/a>); Committee for a Responsible Federal Budget (8<\/a>), (9<\/a>); U.S. Social Security Administration (10<\/a>); Clever Real Estate (11<\/a>); NAR REALTOR News (12<\/a>)<\/p>\n This article provides information only and should not be construed as advice. It is provided without warranty of any kind.<\/p>\n","protected":false},"excerpt":{"rendered":"Moneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below. 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