Social Security is Taxable (7/1/2025)

We know we’re living in a time where misinformation is all around us, and when it comes to politics it seems to get even worse. I don’t write this to be a source of political or journalistic accountability, but I should warn you that this week I’ve been swamped with questions stemming from misinformation around Social Security benefits, so the rest of this edition is admittedly a bit of a fact checking mission.

A week ago today, on July 4th, President Trump signed the “One Big Beautiful Bill” into law. You’ve probably heard plenty about it in the news, but if you try to avoid the news, you’ll recall I wrote about some of the most impactful provisions of the bill when it was initially passed by the House back in May. Much of what I wrote about previously has personal financial and tax planning implications for many of you, and I’m sure we’ll revisit those in the coming months, but the one thing I really want to focus on this week is setting the record straight on Social Security. 

Fact: Trump had pledged during his campaign as well as the State of the Union address to eliminate taxes on Social Security benefits for seniors. However, this provision was not in the bill. I promise you could read all 900 and some odd pages and not a single one of them mentions eliminating taxes on Social Security benefits. 

Fact: Current tax code allows for up to 85% of Social Security benefits to be taxed depending on a recipient’s “combined income” (which includes half of SS benefits, adjusted gross income, and tax-exempt interest). The income thresholds associated with this calculation have not been adjusted for inflation since the 1980’s which means a higher percentage of recipients are subject to tax with each passing year. 

Fact: The highest earners face the largest tax bills, and for most retiree households with lower income, Social Security benefits should remain untaxed from year to year. 

Okay, so what’s prompting all the misinformation and news claiming Trump delivered on this promise? The bonus standard deduction for those over 65. 

What is in the bill is a temporary “bonus deduction” that will be available from 2025-2028 only. This will be an additional $6,000 standard deduction for seniors that will help reduce that combined income calculation I mentioned above, theoretically helping some SS recipients avoid tax on their benefits for the next four years. 

However, lower-income retirees already pay little or no federal income tax on their Social Security benefits, so the extra deduction may not offer additional relief. And higher-income retirees will likely find themselves above the phase-out limits for the extra deduction, and as a result, their Social Security benefits would continue to be taxed at current rates. There will be recipients who fall right in the middle and they should see a reduction in the amount of their SS benefits being taxed, but again, only for the next 4 years. 

So whether you’re receiving Social Security, advising clients who are or will soon be receiving benefits, or just want to be more knowledgeable about our tax system, I hope this provides some clarity. Social Security has been, and will continue to be, taxable. 

We’re living in a time when misinformation is everywhere, and it’s even worse when politics are involved. I’m not here to be a political fact-checker, but I am here to help clear up noise and confusion when it comes to how the news might impact your finances. This week the misinformation has been all about Social Security.

Let’s rewind to July 4th, when President Trump signed the “One Big Beautiful Bill” into law. Maybe you caught coverage of it on the news (or tried not to). If you’ve been following along here, you’ll remember I first mentioned this back in May when it passed the House — especially the provisions that could impact your finances and tax planning. We'll dive deeper into some of those in future weeks, but for now, let’s focus on the part that’s causing the most confusion: Social Security Taxation.

Here’s the TL;DR version of what you should know:

🔍 Claim: Trump eliminated taxes on Social Security benefits.

❌ False. He promised to do so — both on the campaign trail and during the State of the Union — but this is not in the bill. You could read all 900-something pages, and you won’t find a single sentence about eliminating taxes on Social Security.

💡 Fact Check: How Social Security is actually taxed.

Under current tax law, up to 85% of your Social Security benefits can be taxed, depending on your “combined income.” That includes:

• Half of your SS benefits
  

• Your adjusted gross income (AGI)
  

• Tax-exempt interest

Fun fact: The income thresholds used in this calculation haven’t been updated since the 1980s, so a higher percentage of retirees get taxed on their benefits every year 

🎁 So what did change in the bill?

There is a new “bonus standard deduction” for seniors — and this is where the misinformation seems to be stemming from. Starting in 2025 through 2028, seniors over age 65 will get an extra $6,000 standard deduction. Sounds good, right?

Sort of.

• If you’re already paying little to no tax on your Social Security, this likely won’t change much.
  

• If you’re in the upper income brackets, the deduction probably won’t phase in at all.
  

• For those in the middle — not too high, not too low — this could reduce how much of your benefits are taxed… but only for the next four years.

So whether you’re currently receiving benefits, advising someone who is, or just like knowing what’s real vs. rumor — here’s the takeaway:

🧾 Social Security is still taxable.
It was yesterday, it is today, and it likely will be for the foreseeable future.

Hope that clears things up.