Bill Proposes Elimination of Social Security Taxes by 2026: Essential Information for Retirees
The proposed You Earned It, You Keep It Act, introduced by Sen. Ruben Gallego (D-Ariz.) and Rep. Angie Craig (D-Minn.) in separate bills, seeks to permanently eliminate federal taxes on Social Security benefits. If passed by Congress in 2025 and enacted in 2026, this law would end taxes on Social Security benefits starting with income tax returns filed in 2027.
Since 1984, the percentage of Social Security beneficiaries paying taxes on their benefits has significantly increased. In 1984, less than 10% of beneficiaries paid taxes, compared to nearly 56% today. This increase is due to the rise in the Social Security payroll tax wage base, with all wages above $250,000 subject to the 6.2% payroll tax, up from the current $176,100 cap.
The increase in the tax wage base is intended to help offset the lost revenue from retiree tax cuts and extend the trust fund's solvency by decades. According to projections, this approach would enable the Social Security Administration to maintain payments until at least 2058.
However, the You Earned It, You Keep It Act calls for a full repeal of taxes on Social Security benefits, which could have a significant impact in preventing future 'bracket creep.' Bracket creep refers to the situation where inflation causes an individual's income to rise into a higher tax bracket without any change in their actual purchasing power.
The RETIREES FIRST Act, introduced by Sens. Marsha Blackburn (R-Tenn.) and Roger Marshall (R-Kan.), shares a similar goal. It proposes to increase the provisional income thresholds that trigger taxes on Social Security benefits. If passed, the thresholds would be raised to $34,000 for individuals and $68,000 for couples filing jointly. This would reduce the number of beneficiaries paying taxes on their benefits.
Sen. Ruben Gallego stated that the You Earned It, You Keep It Act would actually end taxes on Social Security, unlike President Trump's claim that he had already done so. Sen. Marsha Blackburn, on the other hand, stated that the RETIREES FIRST Act would cut taxes on seniors' benefits, helping them keep more of their hard-earned money.
For more information about tax deductions for seniors, including the new $6,000 temporary tax break targeted to older adults in the new GOP tax megabill, see the report: How the New Senior Bonus Tax Deduction Works. The current solvency forecast for the Social Security program is 2034. The impact of such legislation, if passed, could significantly extend this forecast.
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