President Donald Trump is moving forward with the elimination of taxes on Social Security benefits, which is called the “One Big Beautiful Bill”. The new proposal was previously approved by the U.S. Senate and now has to be introduced in the House of Representatives to continue its development. This initiative has been analyzed by the Congressional Budget Committee and the Committee for a Responsible Federal Budget and they state that the risks and how this tax model would impact future and current pensions should be addressed. Along the same lines, in the House of Representatives, Mike Johnson, has to secure a Republican vote to be able to stand up to Democratic votes. The entire initiative dates back to Ronald Reagan’s proposal. Read on for the full details.
The legislation package returns to the House of Representatives for approval
After several weeks of negotiations, the U.S. Senate has passed a version of President Trump’s campaign promises, which he has named as “the one big beautiful bill.”
At thos tome, the massive legislative package returns to the House of Representatives for approval—a step that could prove challenging, as modifications made by the Senate may cost GOP leaders votes they can’t afford to lose. Republicans at this time hold a four-seat majority in the House, and with all Democrats opposing the bill, Speaker of the House Mike Johnson can just afford to lose a three of votes.
The way the bill would impact Social Security beneficiaries
As far as Social Security is conscious about the issue, the current version would eliminate the taxation of Social Security benefits for retirees. Congress first began taxing these benefits under Republican President Ronald Reagan in 1983. At the time, Democrats controlled the House and Republicans held the Senate, meaning the law neededvbipartisan support to pass.
According to the Congressional Research Service, almost half of Social Security beneficiaries paid taxes on their benefits in 2019, a figure projected to increase to 56% by 2050.
This proportion has increased over time due to the income thresholds planned in the 1983 law were not indexed to inflation, in the meantime Social Security benefits have grown. The legislation specified that each filers with annual incomes under $25,000 and couples filing jointly with incomes under $34,000 would not pay tax. Adjusted for inflation, $25,000 in 1983 would be worth about $82,174 nowadays, and $34,000 would be the same to $111,757. Had these thresholds kept pace with inflation, far fewer beneficiaries would be subject to taxation.
In May 2025, the average monthly Social Security check for a retired worker was $1,950 (or $23,400 per year). In 1983, the average was $440.77 per month (or $5,289.24 annually). This indicates that the original thresholds were targeted at incomes significantly up the average. Since those limits haven’t being modified, many retirees now find themselves in a position where even average benefits could be taxed in the next years.
Trump’s campaing on eliminating taxes on Social Security
President Trump campaigned on eliminating taxes on Social Security. Still, Congress is constrained by the reconciliation process, which Republicans are using to pass the bill and avoid the 60-vote threshold in the Senate. Under reconciliation rules, no direct modifications can be made to Social Security. Still, to honor the campaign promise, the Senate modified the legislation to present seniors a “bonus” to their standard deduction.
The Committee for a Responsible Federal Budget found that the extension of the 2017 tax cuts, along with the recent bonus—set to take effect in 2026—would raise the standard deduction for seniors to $47,000. In effect, only seniors with incomes up this level would pay taxes on their benefits. This approach is less regressive, as it supports low- and middle-income beneficiaries at the same time maintaining tax obligations for higher earners.
The impact on the Social Security Old-Age and Survivors Trust Fund
Nevertheless, the Committee also warned that this modification might accelerate the insolvency of the Social Security Old-Age and Survivors Insurance (OASI) trust fund. Investgiators estimate that by late 2032, the fund could face severe shortfalls, triggering an automatic 25% reduction in benefits. “We estimate that the extension and expansion of the 2017 tax cuts, the expanded senior deduction, and other OBBBA changes would reduce total taxation of benefits by roughly $30 billion per year,” the Committee reported in June.