Social Security benefits provide millions of senior citizens with a stable income during their retirement period. The Social Security program is primarily funded by means of a dedicated Social Security payroll tax wherein the employee contributes 6.2% of their wages and the employer contributes another 6.2%. In 1983, as a means of supplementing the program’s revenue, legislation was introduced that resulted in Social Security benefits being taxed. The revenue from this taxation is then put into both Social Security and Medicare trust funds to supplement the program’s funding.
Fast forwarding to the more recent past, during his presidential campaign in 2024, the now-President Donald Trump had made several promises to eliminate taxes on Social Security benefits. Whilst this would be great news for beneficiaries, the elimination of taxes on benefits would result in the loss of a source of revenue for the program which could potentially lead to benefits being reduced in the future.
As such, there is now some miscommunication that is being spread around regarding the elimination of taxes on Social Security benefits in relation to President Trump’s new One Big Beautiful Bill Act that has been officially signed into law a few days ago. Here is what you need to know.
One Big Beautiful Bill Act does not eliminate taxes on Social Security benefits
Taxes on Social Security benefits will not be eliminated under the new One Big Beautiful Bill Act, in fact, its elimination had not even been proposed in initial drafts of the bill. However, what the bill does offer to Social Security recipients is a temporary additional tax deduction of $6,000 for individuals or $12,000 for joint filers within a certain income threshold.
Despite this, there have been repeated claims from the president and the White House that taxes on Social Security benefits have now been eliminated. Furthermore, an email sent out to beneficiaries by the Social Security Administration (SSA) further claimed that, the OBBBA will “eliminate federal income taxes on Social Security benefits for most beneficiaries” and that the new bill “ensures that nearly 90 percent of Social Security beneficiaries will no longer pay federal income taxes on their benefits.”
As a result, the Social Security chief is now facing criticism for pushing a misleading narrative by claiming that the bill has ended taxes on Social Security benefits when in actuality this is not the case.
What are people saying?
The tax relief for seniors in the bill is a $6,000 additional tax deduction that will be in effect from the tax year 2026 to 2028 for seniors aged 65 and older. Furthermore, the tax break also phases out for seniors in higher income brackets. As such, Tax Foundation chief economist Will McBride says that, “It doesn’t directly address the income that’s in question here, the Social Security benefits, it just simply does not involve that.”
“It’s basically introduced a brand new political football, as if we didn’t already have enough, that will come into play four years from now,” McBride added.
Tax Policy Center senior fellow Howard Gleckman shared in McBride’s opinion and shared that the email was indeed misleading, adding that only around half of the total Social Security beneficiaries would actually benefit from the OBBBA tax break.
“Many Social Security recipients would get no benefit because they already make too little income to pay federal income tax,” Gleckman explained. “Others get no benefit because the senior deduction phases out at high incomes.”
After receiving a barrage of questions regarding the matter, a letter demanding the SSA issue a correction was sent to SSA Commissioner Frank Bisignano from the Members of the Ways & Means Committee.
“We write with alarm about the unprecedented, factually incorrect email you recently sent to tens of millions of current and future Social Security beneficiaries. We urge you to immediately contact those who received this misinformation to correct the record,” the lawmakers wrote. “We know you are aware that your original email was false, because you subsequently quietly updated the most blatantly erroneous claim in a press release posted to your website. However, you have not issued a correction to the tens of millions of individuals with mySSA online accounts who received your email.”
In addition to this, Bisignano also received a letter of concern from Democratic senators led by Senate Finance Committee Ranking Member Ron Wyden.
“We are appalled that the agency distributed misleading and blatantly inaccurate information regarding tax changes affecting older Americans, transforming the agency into a partisan megaphone for Donald Trump while sowing confusion and distrust in SSA among Americans,” they wrote in the letter.