Eliminating taxes on Social Security benefits is missing from President Trump’s tax overhaul.
The lawmakers used the “Byrd Rule” to strike the elimination of taxes on Social Security Benefits, stating that they could not make significant changes to the Social Security program in a Reconciliation Bill. Changing the taxation of it is not changing the program.
The truth is, eliminating taxes on Social Security benefits would reduce federal revenue by an estimated $1.5 to $1.6 trillion over a decade, according to a Penn Wharton Budget Model. Here are the 12 Tax Provisions and I highlighted the one that Republicans are touting as reducing taxes on Social Security.
- Permanently extends the individual tax rates Trump signed into law in 2017, which were set to expire at the end of the year.
- Increases the cap on the state and local tax deduction to $40,000 for taxpayers making less than $500,000, with the cap reverting to $10,000 after 5 years.
- Creates a new tax deduction for tips and overtime pay for workers making less than $150,000. The Senate bill caps this deduction to $25,000. This provision will expire in 2028.
- Allows car buyers to deduct up to $10,000 per year in auto loan interest for cars assembled in the United States and purchased between 2025 and 2028. The deduction would phase out for individuals making over $100,000 or couples making over $200,000.
- Permanently eliminates the personal exemption, which had been temporarily eliminated by the Tax Cuts and Jobs Act of 2017. It offers a temporary tax deduction, set to expire in 2028, of up to $6,000 for seniors. The deduction phases out for individuals with modified adjusted gross income (MAGI) exceeding $75,000 ($150,000 for married couples).
- Increases the maximum amount of the child tax credit from $2,000 to $2,200 per child and indexes the amount of the credit to inflation. The refundable portion of the credit is also indexed to inflation but is not increased.
- Establishes a 1% tax on overseas money transfers made by individuals.
- Establishes a new 2.5% tax credit for metallurgical coal.
- The bill includes an increased tax deduction for whaling boat captains and a waiver process for an exemption for planned SNAP cuts for Alaska along with Hawaii.
- Colleges with more than 3,000 students and an endowment per student ratio of $500,000 would be taxed starting at 1.4%, with the tax rate increasing to 8% for the wealthiest colleges.
- Includes the creation of Trump Accounts, which allow for parents to contribute $1,000 on the birth of a child born between 2025 and 2028 and $5,000 per year, with the money growing tax-deferred, with uses for higher education, job training, or a down payment on a home.
- Phases out clean energy tax credits passed in the Inflation Reduction Act. Wind and solar tax credits will be phased out for projects starting construction after June 2026 or placed in service after 2027. Electric vehicle tax credits will be phased out by September 2025, and EV charging tax credits will be phased out by June 2026. Fees on methane emissions would be postponed for 10 years, while tax credits for biofuels will be extended an additional four years to 2031.
I was in favor of the Energy Related Tax Credits created by the Inflation Reduction Act. I am sad to see them go. However, I suppose we must take the bad with the good, and there is a lot of good here.
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