Trump Wants To Eliminate Social Security Taxes: 3 Ways This Could Impact Retirees
Ex-president Donald Trump has been clear about his intention to leave Social Security alone if he wins a second term this year, with no plans to cut benefits to help prop up the troubled program. Now Trump has taken it a step further by saying Social Security benefits should not be subject to federal income taxes.
Trump Wants To Eliminate Income Taxes: How Would That Impact You If You Are Retired?
Try This: 7 Reasons You Must Speak to a Financial Advisor to Boost Your Savings in 2024
Trump addressed the topic in a July 31 post on his Truth Social network, writing that “SENIORS SHOULD NOT PAY TAX ON SOCIAL SECURITY!” The ex-president didn’t go into detail on the matter.
In order to end taxes on Social Security benefits, Trump would need the cooperation of Congress. That will be a tough ask unless Republicans also win the U.S. House and Senate in the 2024 elections.
Should Trump succeed, here are some of the ways his proposal could impact retirees.
Earning passive income doesn't need to be difficult. You can start this week.
Some Seniors Will See More Money — For Now
Social Security benefits are subject to federal income taxes if you earn a certain amount before reaching full retirement age. Individuals with provisional income (adjusted gross income + nontaxable interest + 1/2 of Social Security benefits) above $25,000 and joint filers with provisional income above $32,000 have up to 50% of their Social Security benefits taxed. For individuals with provisional income above $34,000 and joint filers above $44,000, up to 85% of Social Security is taxed.
About 40% of seniors who receive Social Security have to pay taxes on the benefit, according to the Social Security Administration. If these taxes are eliminated altogether, seniors previously affected will not have to see their benefits reduced.
Be Aware: 8 States To Move to If You Don’t Want To Pay Taxes on Social Security
Benefits Could Be Cut Sooner Rather Than Later
Eliminating taxes on Social Security benefits would put the already stressed program under even greater stress. Social Security’s Old Age and Survivors (OASI) Trust Fund is due to run out of money within the next decade, leaving the program solely dependent on payroll taxes for funding. Payroll taxes currently fund about 77% of benefits, but the program also gets funds from income taxes.
“Exempting Social Security benefits from taxation will further increase the insolvency of Social Security,” George Mason University’s Veronique de Rugy wrote in a recent column for the conservative National Review.
The Committee for a Responsible Federal Budget estimated that the move would push the insolvency date of Social Security’s retirement trust fund up by more than a year. When the fund becomes insolvent, some lawmakers have suggested cutting retirement benefits to deal with the shortfall.
Retirement Age Could Be Raised
Another way to deal with the OASI insolvency is to raise the full retirement age, which is currently either 66 or 67, depending on your birth date. Some lawmakers have suggested pushing the FRA to age 70 to help Social Security save money — a move that could gain even more momentum if income taxes on benefits are eliminated.
Editor’s note on election coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
More From GOBankingRates
7 Reasons You Should Consider a Financial Advisor -- Even If You're Not Wealthy
5 Affordable Car Brands That Will Last Over 10 Years With Proper Maintenance
This is The Single Most Overlooked Tool for Becoming Debt-Free
This article originally appeared on GOBankingRates.com: Trump Wants To Eliminate Social Security Taxes: 3 Ways This Could Impact Retirees