Social Security benefits play an important role in the lives of millions of retirees. More than 66 million Americans receive Social Security benefits. Many retired Americans rely heavily on the payments they receive monthly. For some, the only source of income apart from the money they have saved is the monthly checks. Six million more individuals started receiving their benefits last year.
On average, a retired person spends $4,345 monthly to cover their expenses. At the same time, the social security payments that a retiree receives are below $2,000. The Social Security income replaces only approximately 40% of a person’s pre-retirement income. So, if a person is uses only the monthly checks, they could be struggling financially.
For a person who is looking forward to claiming their benefits, it is important to know the history of taxation when it comes to Social Security income. The government started taxing Social Security benefits post the Amendments of 1983.
The Omnibus Budget Reconciliation Act of 1993, which was brought about a decade later, resulted in the expansion of the system. With the amendment, a second tier of taxation was introduced that is used to date.
For some individuals, their Social Security benefits might be taxed depending on their combined income. Beneficiaries with a combined income lower than $25,000 do not have to pay any federal taxes on their benefits. The threshold for people who file jointly has been set at $32,000.
Individuals with a combined income of $25,000 and $34,000 could be taxed up to 50% on their benefits. The income threshold for the same for joint filers is set at $32,000 to $44,000. For beneficiaries who with a combined income of more than $34,000, 85% of their benefits may be taxed.
President Trump just posted this on TruthSocial, and I totally agree 100% with his statement. I’ve personally been receiving Social Security benefits for about a year now, and yes, I’m having to pay taxes on them. Totally pisses me TF off! 🤬 pic.twitter.com/VGGlM3qGWV
— DK🇺🇸🦅🇺🇸 (@1Nicdar) July 31, 2024
According to the Center on Budget and Policy Priorities, half of the beneficiaries who receive Social Security benefits do not get taxed on their benefits. This is because the individuals’ income falls within the threshold set for taxation.
An average beneficiary pays 7% of their benefits because of the taxation guidelines. Individuals who earn less than $63,300 pay up to 1% of their benefits in income taxes. Beneficiaries with a combined income of more than $205,800 pay 20% of their benefits in income taxes.
The only limitation regarding this system is that it has never been indexed considering factors like inflation since its establishment. This means the phenomenon known as the “bracket creep” comes into play here, which can result in the retirees facing challenges.
BREAKING: A bill was recently introduced to exclude Social Security benefits from taxes: pic.twitter.com/8asq7FKDQi
— The Money Cruncher, CPA (@money_cruncher) February 6, 2025
The main aim of the federal taxation policies is to ensure the long-term financial stability of Social Security. The policies, in turn, create an essential baseline for retirees that can impact their retirement plans negatively.
During his 2024 Presidential campaign, Donald Trump advocated for Social Security benefits not being taxed. The initiative was followed up by Representative Thomas Massie in February 2025. The Republican introduced the Senior Citizens Tax Elimination Act.
