President-Elect Donald Trump Is Probably Already Done Paying His 2025 Social Security Taxes While You Pay All Year. Here's Why

Say what you will about President-elect Donald Trump, but I think we can all agree he's richer than most of us could ever dream of becoming. His 2024 financial disclosures reported more than $160 million in income from his Miami golf course and another $56 million from Mar-a-Lago. Add in a few other golf courses, development projects, book royalties, and so on, and he made north of $700 million in 2023 from his business income alone.

Almost as staggering is the fact that Trump likely doesn't have to worry about paying any more Social Security taxes on his income for the remainder of the year, while you and I will likely be paying them until Dec. 31. It's not because he's a former president or a president-elect. It's all to do with a Social Security rule that many workers and retirees are begging the government to change.

Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »

Image source: Getty Images.

How Social Security payroll taxes work

Social Security has three sources of funding: Payroll taxes on workers, interest income on the program's trust fund assets, and benefit taxes on seniors. The largest of these by far is the payroll tax. Right now, it's 12.4% for self-employed workers. It's split for traditionally employed workers, with the employee paying 6.2% and the employer paying the other 6.2%.

Most of us pay this tax on every dollar we earn, but that's not the case for the wealthy. The Social Security Administration actually only taxes the first $176,100 a person earns during 2025. That's a drop in the bucket for billionaires like Donald Trump.

We don't know what his 2025 income will look like, but if it's anything close to his 2023 income, he's averaging close to $2 million a day. If we spread that amount out equally throughout the year, he'd have made his first $176,100 by a little after 2 a.m. on Jan. 1. The rest of what he earns during the year will still be subject to income tax and Medicare tax, but he won't contribute a penny more toward Social Security.

This isn't just true for Trump. While few others will exceed the $176,100 taxable wage base for Social Security as quickly, roughly 9 million Americans earn more than this and will earn at least some income during the year that the Social Security Administration never sees a dime from.

To be clear, if you don't pay Social Security payroll taxes on your income, the government also doesn't consider those dollars when determining the size of your retirement benefit later. But given their high incomes, the size of their Social Security benefit probably isn't a huge deal to them.

People want the government to raise the Social Security taxable wage base

One of the most popular reforms put forward to resolve Social Security's funding crisis is to raise or eliminate Social Security's taxable wage base. This would increase revenue for the program by raising taxes on the wealthy without hurting lower- or middle-class Americans.

It would have a significant effect, too. Let's return to the example of Donald Trump's $700 million income from 2023. If he'd paid even 6.2% of that in Social Security taxes, that's $43.4 million right there.

But there are two important things to bear in mind. Under the current Social Security benefit formula, if you pay Social Security taxes on your income, the government includes that income when determining the size of your checks. So billionaires who pay more would also be entitled to significantly larger retirement benefits.

The other, more important, point is that even if the government were to assess Social Security payroll tax on every penny every American earned, it would only close about half of the program's $23.2 trillion expected funding shortfall. This means we might buy ourselves a few years, but the government would still have to increase the payroll tax rate for all Americans or find alternative income sources to help retirees avoid future benefit cuts.

Right now, we don't know whether the government will take any action to change or eliminate the ceiling on Social Security payroll taxes. All we can do is wait and see. But we likely won't have to wait long. Current estimates suggest the trust funds will be depleted by 2035, so Congress is likely to put reforms into place within the next decade.

The $22,924 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.