President-elect Donald Trump said on social media during his campaign in July that seniors should not have to pay Social Security taxes. Some people who get Social Security payments owe income tax on a portion of those payments right now.
A lot of people talked about and strongly opposed Trump’s plans to get rid of the taxes that are paid on Social Security benefits. A number of financial experts say that lowering taxes on Social Security will make the already unstable program even worse.
The CBO says that the trust funds for the system will run out of money by 2034, even if no cuts are made. Will Trump be able to keep his promise to lower taxes, even though doing so could put Social Security’s future in much more danger? Here is what you need to know about Trump’s plan to get rid of taxes on Social Security benefits.
Here is what will happen with Social Security taxes when Trump takes office in 2025
The Tax Policy Center says that people who make between $63,000 and $200,000 would benefit the most from any plans to get rid of taxes on Social Security benefits.
At the moment, people with low to moderate incomes do not have to pay taxes on their Social Security benefits. People who get Social Security and have to pay taxes on it usually have other large sources of income, like jobs or other income that they report on their tax return.
The IRS figures out if a beneficiary has to pay income tax by adding up their total income, which is half of their Social Security benefits plus interest that is not taxed plus some other income.
If you are a single taxpayer in 2024 and make between $25,000 and $34,000 a year, you may have to pay income tax on up to half of your benefits. If your total income is more than $34,000, you may have to pay income tax on up to 85% of your benefits.
You will have to pay taxes on up to half of your income if you make between $32,000 and $44,000 a year if you file a joint tax return. If you make more than $44,000 a year, you will have to pay taxes on up to 85% of your income. The Social Security Administration says that about 40% of people who get benefits pay taxes on them.
Experts say that getting rid of taxes on Social Security benefits would cause major problems with the program itself. One example is Social Security, which is made up of two parts: Disability Insurance (DI) and Old Age and Survivors Insurance (OASI).
The OASI program helps retired workers, their eligible dependents, and some survivors. The DI program helps disabled workers and their eligible dependents.
The program is paid for by payroll taxes and benefit income taxes. Employers, workers, and independent contractors all pay payroll taxes. People who get Social Security benefits, on the other hand, have to pay taxes on those benefits.
Garret Watson, a senior policy analyst and modeling manager at the Tax Foundation, says that the OASDI trust fund gets the tax money from up to half of all payments. The rest of the money goes to the Medicare Hospital Insurance Trust Fund.
The Tax Foundation says that Trump’s planned tax cut will cause the government to collect $1.4 trillion less in taxes from 2025 to 2034.
Watson says that taking away income tax breaks from benefits would mean less money coming into Social Security and Medicare, which would speed up the time when the programs run out of money.
The complicated nature of Social Security is highlighted by Trump’s tax proposal
Trump’s plan to lower Social Security taxes brings up the issue of how complicated the program is, which has been talked about a lot.
Getting rid of taxes could make the program go bankrupt faster, which would affect millions of Americans, even if some users would benefit from tax-free benefits.
Watson says that instead of getting rid of Social Security taxes, it would be smarter to adjust the income tax rates every year to account for inflation. He says that this is a good solution as long as it is paired with a good way to make up for the lost revenue.
