No Tax on Social Security? Here’s What Retirees Should Know in 2025

Introduction: A Long-Standing Controversy

Social Security was never meant to be taxed. When President Franklin D. Roosevelt signed the Social Security Act into law in 1935, the idea was simple: guarantee income to older Americans who had spent their lives working and contributing. Yet for millions today, that promise feels diminished.

In 2025, about half of all Social Security recipients are taxed on their benefits, some losing as much as 85% of their checks to the IRS. As inflation eats away at fixed incomes and the cost of living rises, pressure is building to eliminate these taxes.

Is the idea of no tax on Social Security just a political talking point, or could it become reality?

The History of Social Security Taxation

Social Security benefits remained untaxed for nearly 50 years. That changed in 1983, when Congress passed reforms to address the looming insolvency of the program.

Under those changes:

• Up to 50% of benefits became taxable if your income (including half your benefits) exceeded $25,000 (single) or $32,000 (married).
• In 1993, a second tier was added: up to 85% of benefits could be taxed if income exceeded $34,000 (single) or $44,000 (married).

Here’s the issue: those income thresholds have never been adjusted for inflation. What was considered “high income” in 1993 is middle class or even lower-middle class today.

How Social Security Is Taxed in 2025

As of this year, these outdated thresholds are still in place. If your combined income (defined as your adjusted gross income + nontaxable interest + half of your Social Security benefits) exceeds:

• $25,000 (single) or $32,000 (married) → Up to 50% of benefits are taxable
• $34,000 (single) or $44,000 (married) → Up to 85% of benefits are taxable

This means a senior living modestly—maybe with a small pension, part-time work, or IRA withdrawals—could find a significant portion of their Social Security taxed.

It’s not just a matter of policy—it’s a math problem for retirees struggling to stretch fixed incomes.

State Taxes on Social Security

To make things more confusing, 12 states currently tax Social Security benefits at the state level in some form (as of 2025), including:

• Colorado
• Connecticut
• Kansas
• Minnesota
• Missouri
• Montana
• Nebraska
• New Mexico
• Rhode Island
• Utah
• Vermont
• West Virginia

Many of these states are facing growing pressure to phase out or eliminate these taxes. Some already offer exemptions based on income or age.

Arguments for Eliminating Social Security Taxes

1. Double Taxation

Social Security is funded by payroll taxes—money that workers have already paid from their earnings. Taxing the benefits later feels like the government is double-dipping.

2. Unfair to Middle-Class Retirees

The income thresholds haven’t kept pace with inflation, meaning more seniors are taxed every year despite having modest retirement income.

3. Boost to Economic Activity

If retirees could keep more of their Social Security income, they’d spend more on essentials like groceries, healthcare, and housing, stimulating local economies.

4. Moral and Political Fairness

Many see taxing Social Security as a broken promise, especially as the cost of living soars and the average benefit struggles to cover basic needs.

Arguments Against Elimination

1. Revenue Loss

Social Security taxation brings in about $50–$80 billion per year in federal revenue. Eliminating the tax would create a funding gap.

2. Regressive Impact

Some economists argue that eliminating taxes benefits higher-income retirees disproportionately, since lower-income recipients are often below the taxable threshold already.

3. Political Optics

While popular among seniors, eliminating the tax may be seen as a “giveaway” in budget-tight years unless offset by spending cuts or new revenue sources.

Where the Politics Stand in 2025

Several members of Congress—especially from retirement-heavy states like Florida, Arizona, and Pennsylvania—have reintroduced bills in 2025 aimed at removing federal taxation on Social Security.

Notable efforts include:

• The You Earned It, You Keep It Act, which would fully eliminate federal tax on benefits.
• Proposals to index income thresholds to inflation going forward.
• Compromise bills to phase out taxes only for lower and middle-income retirees.

President Biden has voiced cautious support for reform but insists changes must be “fiscally responsible.” As the 2026 midterms approach, the issue may become a key wedge in older-voter battlegrounds.

What This Means for You

If you’re collecting—or planning to collect—Social Security, here’s what you should do in 2025:

1. Know Your Combined Income

Use the SSA worksheet or IRS Form 1040-SR to calculate how much of your benefits may be taxed.

2. Plan Withdrawals Strategically

Roth IRA withdrawals, health savings accounts (HSAs), and tax-free municipal bonds can help lower your taxable income.

3. Stay Informed on Legislation

Laws could change rapidly. Follow Congressional updates or sign up for AARP alerts.

4. Consider Relocation

If you’re paying state taxes on Social Security, moving to a tax-friendlier state could help your retirement dollars go further.

Is Tax-Free Social Security the Future?

Momentum is growing. With inflation persisting, boomer retirements peaking, and the 90th anniversary of Social Security just around the corner, calls to reform taxation on benefits are louder than ever.

Whether it’s a complete repeal, a partial rollback, or simply adjusting thresholds for inflation, change is coming—possibly within the next few years.

For now, smart tax planning and political awareness remain your best tools.