Trump’s Tax Law Is Quietly Costing Social Security $169 Billion

As part of his presidential campaign, Donald Trump pledged to do away with taxes on Social Security benefits.

He didn’t quite pull that off. But in the interim, a lot of seniors are getting a reprieve from paying taxes on their monthly Social Security checks.

Trump’s One Big Beautiful Bill Act (OBBBA) introduced a $6,000 senior tax deduction that’s made it so the majority of people collecting Social Security aren’t paying taxes on their benefits now. But while that may be a good thing for those retirees, it’s a bad thing for Social Security on a whole.

Social Security depends on taxes beyond payroll contributions

Many people know that Social Security is primarily funded through payroll taxes. Workers and employers each contribute 6.2% of wages up to an annual taxable earnings limit, with self-employed workers paying both shares. Those payroll taxes provide the vast majority of the revenue that supports retirement, survivor, and disability benefits.

But payroll taxes are not the program’s only funding source. A portion of Social Security benefits is also subject to federal taxes for retirees whose income exceeds certain thresholds. Revenue from the taxation of Social Security benefits is directed back into the program’s trust funds, creating an additional income stream for the program.

That’s where the new senior deduction comes into play. The OBBBA’s temporary $6,000 senior tax deduction lowers taxable income so much that many seniors who previously paid taxes on a portion of their Social Security benefits may now owe substantially less tax — or none at all. As a result, less revenue from benefit taxation flows back into Social Security.

The Social Security Administration’s Office of the Chief Actuary recently made the problem abundantly clear — between 2025 and 2034, the OBBBA is expected to cost the program $168.6 billion. So while the new $6,000 tax deduction may be helping seniors better manage their costs today, it could also push Social Security even closer to benefit cuts.

The deduction may be temporary, but the solvency concerns are not

One important thing to remember is that the $6,000 senior deduction is not permanent. Unless lawmakers extend it, that provision is scheduled to expire in 2028. But still, the impact on Social Security’s finances could be significant.

Social Security’s trust funds were already projected to face depletion by 2033 before the OBBBA. In its wake, that depletion date has been pushed up to 2032. If lawmakers don’t act, Social Security could be looking at sweeping benefit cuts in just six years, or possibly even less, depending on how things play out in the coming years.

It’s best to prepare

The OBBBA has clearly put Social Security in a worse financial situation. That’s something current and future retirees have to prepare for.

Current retirees should try to reduce spending and consider working part-time to boost income. Those who previously paid taxes on their Social Security benefits should try banking that savings while the $6,000 senior deduction remains in effect.

Current workers, meanwhile, should increase contributions to IRAs and 401(k)s. Those who expect to be heavily reliant on Social Security may also want to consider postponing retirement to save more and delay benefits past full retirement age.

While the OBBBA’s $6,000 senior tax deduction may be offering short-term relief for older Americans, it’s created a situation where Social Security faces even more financial pressure. If the deduction sunsets on schedule in 2028, seniors might bemoan that loss. But in reality, extending it could put Social Security in an even more precarious situation.