Why It Matters

A Congressional Research Service analysis of Social Security's tax treatment, published September 2, reveals a widening gap in how the system affects beneficiaries based on marital status and income sources. The report highlights that recent tax law changes are reshaping revenue streams for both Social Security and Medicare, with particular implications for disabled workers and their spouses navigating complex income thresholds that have not been adjusted since 1984.

Disabled workers aged 25-59 comprise the overwhelming majority of beneficiaries in that age range, yet their tax exposure depends heavily on whether they have a working spouse. The current tax policy landscape, particularly the extension of provisions from the 2017 Tax Cuts and Jobs Act, is indirectly reshaping how much beneficiaries owe on their Social Security income.

The Big Picture

Nearly 98% of Social Security beneficiaries aged 25-59 receive benefits on the basis of disability. Disabled workers comprise 78.1% of Social Security beneficiaries aged 25-59 receiving benefits on the basis of disability. To qualify, a person must be unable to engage in substantial gainful activity due to a medically determinable impairment expected to last at least 12 months or result in death. In 2026, the substantial gainful activity threshold is set at $1,690 per month for most workers and $2,830 per month for blind workers.

Under current law, up to 50% of Social Security benefits become taxable when provisional income exceeds the first-tier thresholds of $25,000 for single filers or $32,000 for married filing jointly. Up to 85% of benefits become taxable above second-tier thresholds of $34,000 for single filers or $44,000 for married filing jointly. However, these thresholds are not indexed for inflation or wage growth.

Over 85% of single beneficiaries aged 25-59 have provisional income below the first-tier threshold, meaning none of their Social Security benefits are taxable. Among those reporting only Social Security income, over 99% fall below that threshold. In stark contrast, less than 40% of married beneficiaries aged 25-59 have no taxable Social Security benefits, and more than 52% have provisional income above the higher second-tier threshold, potentially owing taxes on up to 85% of their benefits.

A non-disabled spouse is not subject to substantial gainful activity earnings limits, so household income can be substantially higher for married beneficiaries. Over 70% of married beneficiaries with earnings or pension and IRA income exceeded the higher statutory threshold for benefit taxation. Single beneficiaries aged 25-59 were more likely to report receiving public assistance such as Supplemental Security Income, SNAP, or housing assistance, which generally is not included in provisional income calculations.

The Congressional Budget Office estimates that in 2026, income taxes on Social Security benefits will total $120 billion, equal to 7.1% of total Social Security benefits paid that year. That figure is projected to rise to $212 billion by 2036. In 2025, the Social Security trust funds received $57.8 billion from taxation of benefits up to the 50% threshold, representing 4.9% of their total income. The Medicare Hospital Insurance trust fund received $41.1 billion from taxation of benefits above the second-tier threshold, representing 8.9% of its total income.

P.L. 119-21, known as the One Big Beautiful Bill Act, also created a temporary enhanced $6,000 tax deduction, and $12,000 for couples over 65 years old filing jointly. According to the 2026 Social Security Trustees Report, less income tax will be paid on Social Security benefits as a result of this law, and the Old-Age and Survivors Insurance and Disability Insurance trust funds will receive lower levels of revenue in the future from income taxation of Social Security benefits.

The Bottom Line

The taxation thresholds are not indexed for inflation or wage growth. Armed with this information, Congress now faces a choice between indexing these thresholds to inflation or accepting continued revenue erosion to both the Social Security and Medicare trust funds, particularly as the tax code itself becomes more favorable to higher-income households.

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