Will Social Security be taxed in 2026? What retirees should know about the GOP budget bill

As the 2026 tax landscape begins to take shape under President Trump's newly released budget proposal, one key question has emerged for millions of retirees: will Social Security income still be subject to federal taxes?

Despite early campaign promises to eliminate those taxes, the answer, at least for now, appears to be yes.

Trump's nearly 400-page plan, dubbed the "one, big, beautiful bill," outlines broad tax reforms, including extensions of his original 2017 tax cuts and new relief measures targeting middle-class Americans and senior citizens.

However, while the proposal makes good on plans to eliminate taxes on tips and overtime pay, it stops short of exempting Social Security benefits from taxation-a notable omission that's raising eyebrows.

Social Security benefits still face potential taxation

Under current federal law, a portion of Social Security benefits can be taxable depending on a retiree's combined income-defined as the sum of adjusted gross income (AGI), non-taxable interest, and half of Social Security benefits.

Here's how it breaks down:

• No tax if combined income is below $25,000 for individuals ($32,000 for couples filing tly).
• Up to 50% taxable if combined income falls between $25,000 and $34,000 ($32,000-$44,000 for couples).
• Up to 85% taxable if combined income exceeds $34,000 ($44,000 for couples).

These thresholds are not indexed to inflation, which means more retirees are being taxed on their benefits each year. As it stands, about 40% of Social Security recipients pay federal taxes on a portion of their benefits, according to the Social Security istration.

A new standard deduction for seniors may offer greater benefits

While Trump's bill doesn't remove taxes on Social Security income, it introduces a new, potentially more impactful measure: an additional $4,000 standard deduction for individuals aged 65 or older. For married seniors filing tly, that means an $8,000 boost in standard deductions-designed to ease the burden on low-to-moderate-income retirees.

This expanded deduction phases out at modified AGI levels above $75,000 for singles and $150,000 for couples, ensuring the benefit targets those who need it most.

When paired with a broader temporary increase to the standard deduction for all Americans, the combined tax savings could outweigh the benefit of exempting Social Security income-especially for retirees who rely primarily on those payments.

Why the Social Security tax exemption was left out

There are three likely reasons the bill avoids eliminating taxes on Social Security benefits:

• The new deduction helps lower-income retirees more. As the proposal is structured, eliminating taxes on benefits would disproportionately favor higher-income seniors, while the increased standard deduction provides broader relief to those with less financial flexibility.
• It protects Social Security's funding. Taxes on benefits generate roughly $50 billion annually-a vital revenue stream as the program faces a projected funding shortfall by 2034. Eliminating that revenue could accelerate the depletion of the trust fund.
• The bill is still far from final. The proposed legislation is in its early stages and will likely undergo significant changes. There's no guarantee that the additional deduction-or any senior-focused tax relief-will make it into the final law.

In short, while the promise to eliminate taxes on Social Security remains unfulfilled, the bill does introduce meaningful tax relief that may serve many retirees better in the long run. Still, with much of the legislative process ahead, retirees should stay tuned for potential changes.

Whether you're drawing benefits now or planning for the future, understanding how income impacts your Social Security taxes is more important than ever. And while a total exemption isn't on the table-for now-some seniors may see more money in their pockets under this evolving plan.