The $25,000 Line That Taxes Social Security Has Not Moved Since 1984. A $2,170 Check Plus a $12,000 Pension Crosses It
Congress set a tax trigger for Social Security benefits when Reagan was president and never adjusted it, while your checks keep growing. Find out how a modest pension can quietly pull your benefits into taxable territory, and why a temporary…
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Many people look forward to claiming Social Security in retirement. But some retirees end up with a big shock when they realize that they aren’t eligible to keep their Social Security checks in full.
The reason boils down to a decades-old formula that determines whether Social Security benefits are subject to taxes or not. And as benefits increase over time, more seniors are likely to end up losing money to taxes.
The $25,000 threshold that’s stuck in the past
Years ago, Social Security found itself deep in the throes of a financial crisis. Congress had to act to prevent program cuts, so reforms were implemented to allow for the taxation of benefits.
Since 1984, a provisional income of $25,000 for single tax filers has meant that a portion of Social Security benefits can be taxable. Provisional income is calculated as the total of adjusted gross income, tax-exempt interest income, and 50% of annual Social Security benefits.
The problem is that the $25,000 provisional income threshold that was established decades ago has not gotten an inflation adjustment. But benefits have. And as benefits have increased through the years, more Social Security recipients find themselves at risk of being taxed.
Meanwhile, Social Security benefits are getting a 3.6% cost-of-living adjustment, or COLA, in 2026. That’s the most generous increase to arrive in years. Once that COLA takes effect, the average monthly Social Security benefit is expected to increase to $2,170. On an annual basis, the typical Social Security recipient will get to collect $26,040.
When we take half that amount, which is what’s included in the formula for provisional income, we get $13,020. A $12,000 pension plus the average 2027 Social Security benefit would push a single tax-filer above the $25,000 provisional income mark, potentially subjecting a portion of their benefits to taxes.
Granted, if the only income to account for is a $2,170 monthly Social Security check and a $12,000 annual pension, there’s not much of a tax hit to worry about. The point, rather, is that Social Security’s provisional income rules are very dated, and recipients need to understand that their benefits may not be theirs to keep in full.
A temporary reprieve soon runs out
As part of the One Big Beautiful Bill Act, some seniors are now eligible for a $6,000 deduction. That deduction exempts income from taxes, as all deductions do. As a result, many Social Security recipients are currently exempt from paying taxes on their monthly benefits due to having low enough provisional income.
But that $6,000 deduction won’t last forever. Currently, it’s set to expire in 2028. So if that’s what’s been keeping you from having your benefits taxed, you may want to gear up for a big change after 2028, especially as Social Security benefits continue to grow as COLAs come through.
Of course, if lawmakers vote to extend the $6,000 senior deduction, things could change. But for now, it’s best to assume that taxes on Social Security might come into play – if not in 2028, then at some point in time.
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Maurie Backman has more than a decade of experience writing about financial topics, including retirement, investing, Social Security, and real estate. Her work has appeared on sites that include The Motley Fool, USA Today, U.S. News & World Report, The Washington Post, and Kiplinger.
Prior to becoming a full-time financial writer, Maurie worked in the financial industry trading distressed debt. She then changed course and spent a few years designing electronic toys. After a stint in content marketing and UX, she shifted back into writing and has since covered everything from the housing market to estate planning to Medicare.
When she's not busy writing, Maurie can be found hiking, walking her dogs, driving her kids to their various sports practices and games, and curling up with a good book. She cooks on occasion and bakes way too often.
