The income thresholds that trigger federal taxes on Social Security benefits haven’t changed since 1984. A single retiree earning just $25,001 in combined income today faces the same tax exposure as someone earning that amount four decades ago, even though $25,000 in 1984 had the purchasing power of roughly $77,000 today. Congress set those numbers, never adjusted them for inflation, and millions more retirees have quietly crossed into taxable territory with each passing year.
That design is now at the center of a serious legislative push. A bill introduced in 2025 would wipe out federal taxes on Social Security benefits entirely, not just soften their edges. It’s called the You Earn It, You Keep It Act, and the version working its way through the Senate is drawing real attention from retirees who feel the program’s current tax structure was never meant to reach them.
Whether a Social Security recipient owes federal taxes in 2026 still depends on their total income and where they live. Federal taxes have applied to some recipients since 1984, but legislation moving through Congress could alter how many retirees owe taxes in the years ahead. The debate is no longer hypothetical. It’s playing out in real bills, with real numbers attached, and real implications for the trust fund that pays those benefits.
Why Social Security Benefits Are Taxed in the First Place
Since 1984, Social Security benefits have been subject to federal income tax depending on a recipient’s total income. That taxation threshold is determined using a formula based on combined income, which includes wages subject to Social Security taxes, essentially regular employment income. The IRS adds together adjusted gross income, nontaxable interest, and half of a recipient’s Social Security benefits to arrive at that combined income figure.
Up to 50% of Social Security benefits are taxable for individuals with $25,000 to $34,000 in combined income, and married couples filing jointly with between $32,000 and $44,000. Up to 85% of benefits are taxable for individuals with more than $34,000 in combined income and married couples with over $44,000.
The structural problem is that the income thresholds that trigger taxation have never been updated since they were first set. Some lawmakers have proposed raising them instead of eliminating the tax altogether. Senators Marsha Blackburn and Roger Marshall introduced the RETIREES FIRST Act, which would increase the thresholds to $34,000 for individuals and $68,000 for couples filing jointly, compared to the current $25,000 and $32,000.
But others argue that adjustment is insufficient, and that the entire framework needs to go.
The You Earn It, You Keep It Act: What It Proposes
In early September 2025, Senator Ruben Gallego of Arizona introduced a bill that would permanently eliminate federal taxes on Social Security benefits. The proposal, called the You Earn It, You Keep It Act, mirrors a bill introduced in April 2025 by Representative Angie Craig of Minnesota.
Gallego framed the issue in personal terms, noting that he has paid into Social Security since his first job, yet seniors are still forced to pay taxes on their hard-earned benefits. “Trump claimed he ended taxes on Social Security. My bill actually does it. Permanently,” Gallego said.
The bill’s funding mechanism is where it diverges most sharply from other proposals. Rather than requiring transfers from the federal Treasury, the You Earn It, You Keep It Act would apply the payroll taxes that fund Social Security to incomes in excess of $250,000 per year. Currently, only the first $176,100 a person earns is subject to this tax. In 2026, wages up to $184,500 are subject to the Social Security payroll tax, meaning the bill would extend the tax to earnings more than $65,000 above the current cap.
The projected benefit to the trust fund’s long-term health is significant. According to CNBC’s reporting on an analysis by Social Security’s chief actuary, the You Earned It, You Keep It Act would extend the Social Security trust funds’ ability to pay full benefits for 24 years, until 2058. That matters because the stakes without action are concrete: the combined OASI and DI trust funds are projected to have dedicated revenue to pay all scheduled benefits until 2034, with 83 percent of benefits payable at that time.
For a deeper look at the broader funding pressures on Social Security, including new CBO projections that moved the insolvency date forward to 2032, see Social Security Benefits Predicted to Run Out Earlier Than Expected.
What Elimination Would Actually Mean for Retirees
The financial case for social security tax elimination is straightforward for most recipients. The Senior Citizens League estimates that eliminating taxes on Social Security benefits would save the typical senior household about $3,000 annually. Eliminating those taxes would also help offset inadequate cost-of-living adjustments, making up for an estimated 69 percent of the buying power Social Security payments have lost since 2010.
About 4 in 10 Social Security beneficiaries currently pay tax on a portion of their benefits, according to the Social Security Administration. That share has grown steadily because the thresholds are fixed. A retiree who earned modest investment income or a small pension decades ago might have comfortably stayed below the taxable floor. Inflation and rising account balances push millions over it each year with no corresponding adjustment from Congress.
Many people planning for retirement incorrectly assume their Social Security benefits won’t be taxed. While Supplemental Security Income is never taxed, about half of Americans who receive retirement, survivor, and disability benefits may pay taxes on up to 85% of their benefits, depending on annual income.
The bill’s state-level picture has also been shifting. West Virginia completed its phase-out of Social Security taxation in 2026, with all benefits fully exempt on 2026 returns filed in 2027. Only nine states still tax Social Security benefits in 2026, and most offer income-based exemptions. Federal legislation would close the remaining federal exposure for all recipients regardless of where they live.
The Other Bills in Play – and Where Congress Stands
The You Earn It, You Keep It Act isn’t the only proposal targeting social security tax elimination. Senators Tommy Tuberville of Alabama and Tim Sheehy of Montana introduced the Senior Citizens Tax Elimination Act, with Tuberville’s office describing the current taxation as an “unjust double tax on Social Security benefits.”
All of these proposals exist in direct contrast to what Congress actually delivered in 2025. Despite campaign pledges to eliminate taxes on Social Security benefits, the GOP mega tax bill that Trump signed into law on July 4, 2025, doesn’t change Social Security taxation. What the law did provide was a temporary deduction. Effective for 2025 through 2028, individuals who are age 65 and older may claim an additional deduction of $6,000, on top of the current additional standard deduction for seniors. The deduction is $6,000 per eligible individual, or $12,000 total for a married couple where both spouses qualify, and it phases out for taxpayers with modified adjusted gross income over $75,000, or $150,000 for joint filers.
For eligible seniors, the new senior deduction can meaningfully reduce taxable income. However, it does not eliminate taxes on Social Security benefits. The long-standing rule that up to 85% of Social Security benefits may be taxable remains in place.
The Tax Policy Center estimates that fewer than half of older adults will benefit from the new senior deduction. The lowest-income seniors receive no benefit because their taxable income is typically already less than the standard deduction and existing senior deductions they already claim. The One Big Beautiful Bill Act’s deduction is only designed to last through 2028. The proposals from legislators like Gallego, Craig, Tuberville, Sheehy, and others would permanently end the federal taxation of benefits.
The procedural path also constrained what Congress could accomplish through the budget bill. Bills passed via reconciliation cannot include provisions that directly relate to Social Security, complicating efforts to end taxes on Social Security benefits through that process. Permanently eliminating Social Security taxes requires standalone legislation – exactly what Gallego, Craig, and others are pursuing.
What to Do Now
The You Earned It, You Keep It Act proposes eliminating federal Social Security taxes beginning with 2026 returns, but it has not yet become law. Given the partisan dynamics in Congress, these bills are likely to face an uphill battle. That means retirees need a strategy that works under current law, not one that depends on pending legislation.
For the 2025 tax year, filed now, the $6,000 senior deduction is available to those 65 and older with modified adjusted gross income under $75,000 for single filers or $150,000 for joint filers. Retirees with income near those thresholds can sometimes stay below the cutoff by timing IRA withdrawals strategically, delaying capital gains realizations, or making qualified charitable distributions directly from an IRA after age 70½ rather than taking the money as income first.
The 2026 Social Security COLA of 2.8 percent added a small monthly increase for most recipients, but that same increase lifts combined income slightly, which can push some recipients closer to or across the taxable threshold for benefits. Other strategies for minimizing Social Security taxation include converting traditional IRA funds to a Roth IRA before claiming, using Roth withdrawals during high-income years, managing capital gains carefully, adjusting part-time work, and relocating to a state that doesn’t tax Social Security.
The Real Number at Stake
Track the You Earn It, You Keep It Act’s progress through Congress. If it passes, those currently paying federal taxes on their benefits would see relief beginning with their 2026 returns, filed in early 2027. The Senior Citizens League puts the savings at approximately $3,000 annually for a typical senior household – real money that currently flows to the IRS rather than staying in a retiree’s pocket.
The gap between what Congress delivered in the One Big Beautiful Bill Act and what these standalone proposals would actually do is substantial. A temporary deduction with income phase-outs is not the same as a permanent repeal of federal taxes on Social Security benefits. Retirees who want full elimination need to watch these bills, contact their senators, and plan their finances around the current law until something changes.
Disclaimer: This information is not intended to be a substitute for professional financial advice, investment advice, tax advice, or legal advice, and is provided for informational purposes only. Always seek the guidance of a qualified financial advisor, accountant, or other licensed professional regarding your personal financial situation or investment decisions. Do not make financial, investment, or tax decisions based solely on information presented here. Past performance is not indicative of future results, and all investments carry risk, including the potential loss of principal.
AI Disclaimer: This article was created with the assistance of AI tools and reviewed by a human editor.
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