Pants On Fire

In an email I received last Thursday from the Social Security Administration (SSA) I was told - Nearly 90 percent of beneficiaries will no longer pay federal taxes on their benefits.  

True or false?

That claim is false and misleading.

It does not repeal federal income taxes on Social Security benefits.  Instead, it introduces a temporary enhanced standard deduction—up to $6,000 for individuals (or $12,000 for married couples) - for taxpayers aged 65 and older.  This deduction begins phasing out at incomes above $75,000 (individuals) or $150,000 (couples) and expires after 2028.

The White House Council of Economic Advisors cited estimates that roughly 88% of seniors would, thanks to the larger deduction, fall below the taxable threshold on their benefits.  But that is not the same as eliminating the tax - it simply means my total income (post deduction) might result in a reduced tax owed this time around.

The SSA email implied a permanent repeal, rather than a temporary, income-based deduction.

While it may be true that a significant number of seniors (up to ~90%) might not pay federal tax on their social security benefits that tax will not be eliminated.  It is just temporarily offset by a higher deduction, subject to caps, that expires in 2028.

Call it what it is; a one-off deduction; not a repeal.

The taxation of Social Security benefits adds revenue to the program’s trust funds. The taxation of benefits began in 1983, in an effort to stabilize Social Security’s finances.  According to the Committee For A Responsible Federal Budget this deduction hastens the projected insolvency of the trust fund by another year.