The income thresholds that determine whether Social Security benefits get taxed have not moved a single dollar since 1984 for the lower tier and 1994 for the upper tier. Wages, investment returns, and the cost of nearly everything else have risen sharply in that time. The thresholds have not, which means millions of retirees who would never have been caught by the tax when it was written are now paying it every year.
Senator Ruben Gallego (D-AZ) and Representative Angie Craig (D-MN) have put forward a bill in Congress – the You Earned It, You Keep It Act – aimed at permanently achieving a full social security tax exemption for all beneficiaries, rather than chipping at the edges of the problem.
The bill sits alongside several other proposals in Congress aimed at the same outcome, and it sits on top of a temporary senior deduction already signed into law. Not all of them work the same way, and not all of them would have the same effect on the trust fund that keeps Social Security solvent.
How Social Security Benefits Became Taxable in the First Place
Before 1984, Social Security benefits were exempt from federal income tax. That changed after the program ran into a funding crisis. In 1983, Congress approved recommendations from the National Commission on Social Security Reform, also known as the Greenspan Commission, as part of the Social Security Amendments of 1983, taxing the benefits of some higher-income Social Security beneficiaries.
Beginning in 1984, up to 50% of Social Security benefits became taxable for individuals whose provisional income exceeded $25,000 and for couples whose provisional income exceeded $32,000. The architects of the policy estimated that roughly 10% of beneficiaries would ever be subject to it. Because those thresholds were never indexed to inflation, Congress expanded the tax in 1993 to capture a larger share of benefits from higher-income retirees, and the thresholds that determine who pays have never been adjusted for inflation, pulling more people into the tax net each year.
Today, the reach of that policy is far wider than originally intended. According to the Social Security Administration, about 40% of people who receive Social Security must pay federal income taxes on their benefits. As it stands, up to 85% of Social Security benefits can be taxed by the federal government, with how much depending on overall income. For beneficiaries whose Social Security check represents most of what they have, that is not a technicality. The Senior Citizens League estimates the typical senior household would save about $3,000 annually if taxes on Social Security benefits were eliminated.
What the You Earned It, You Keep It Act Would Do
Sen. Ruben Gallego (D-Arizona) introduced the You Earn It, You Keep It Act to eliminate taxes on Social Security benefits. A House version of the bill was introduced by Rep. Angie Craig (D-Minnesota) in April 2025. Together, the two bills represent the most comprehensive push for a full social security tax exemption currently before Congress.
The mechanism is direct: the bill would permanently eliminate federal taxes on Social Security benefits. To offset the revenue loss, the proposal reaches into the opposite end of the income spectrum. It would also expand the Social Security payroll tax to apply to annual earnings over $250,000. In 2026, wages up to $184,500 are currently subject to the Social Security payroll tax. The gap between $184,500 and $250,000 represents a range of earnings currently exempt from payroll tax contributions entirely. High earners who stop contributing partway through the year would, under the Gallego-Craig bill, contribute on income above $250,000 as well.
That design addresses one of the most common objections to eliminating taxes on benefits: the cost to the trust fund. Revenue from taxes on Social Security benefits flows directly into the trust fund. Cutting it without replacing it would accelerate depletion. The You Earned It, You Keep It proposal would extend the Social Security trust funds’ ability to pay benefits in full and on time for 24 years, or until 2058, according to Gallego’s office. That matches an analysis of Craig’s House proposal by Social Security’s chief actuary.
Shannon Benton, executive director of The Senior Citizens League, described the bill as “long-overdue tax relief for seniors who have worked hard and paid into Social Security their entire lives.”
The One Big Beautiful Bill: What It Actually Did and Didn’t Do
President Trump pledged during his 2024 campaign to end taxes on Social Security entirely. He pledged to end taxes on Social Security payments during his 2024 presidential run, and since taking office has instead expanded a tax deduction for senior citizens as part of his One Big Beautiful Bill Act, which became law in early July 2025.
The distinction between a deduction and a full elimination of taxes matters. The One Big Beautiful Bill does include a “bonus deduction” for seniors, but that isn’t tied to Social Security and doesn’t stop benefits from being taxed. That deduction raises the standard deduction for seniors aged 65 and older by up to $6,000 between 2025 and 2028. While it does not directly eliminate taxes on benefits, it could shield more income from federal taxes for retirees.
The tax break phases out for individuals with earnings exceeding $75,000 and for married couples with earnings above $150,000. According to the White House, the deduction is expected to exempt approximately 51.4 million seniors, roughly 88% of Social Security recipients, from paying federal taxes on their benefits.
That leaves about 12% of recipients, generally higher earners above the phaseout thresholds, receiving no benefit from the deduction at all. And because it sunsets after 2028, it is a temporary fix, not a structural one. Gallego’s bill targets that gap directly. As he stated upon introducing it: “Trump claimed he ended taxes on Social Security. My bill actually does it. Permanently.”
The Trust Fund Problem That Complicates Everything
Any proposal to change how Social Security benefits are taxed collides with a larger math problem. The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100% of total scheduled benefits until the fourth quarter of 2032, at which point the fund’s reserves will become depleted and continuing program income will be sufficient to pay only 78% of total scheduled benefits.
The depletion date has moved earlier, not later. According to CBS News, the Social Security Administration moved the insolvency date to the end of 2032, largely due to the 2025 One Big Beautiful Bill Act, which included multiple provisions that together lower tax liability for Social Security beneficiaries. As a result, the trustees project less trust fund revenue from income taxes on Social Security benefits going forward.
The long-run picture is equally stark. A 2025 SSA research summary documents how the proportion of beneficiaries paying taxes on their benefits has risen over time from less than one in ten to more than half, driven by frozen income thresholds. An aging population is a major contributor to the broader solvency problem: the ratio of workers to beneficiaries has dropped from more than 5-to-1 in 1960 to 2.9-to-1 today and is projected to fall further in the decades ahead.
Payroll taxes that fund benefits are levied on a shrinking share of earnings, just 83% of covered wages today compared to 90% in 1983, as higher-income Americans’ wages have grown faster than the taxable maximum. Extending the payroll tax to earnings above $250,000 would recapture some of that lost coverage.
Average monthly benefit cuts at the point of depletion could be around $500 per month, with losses even higher in 29 states, according to research from the Committee for a Responsible Federal Budget. A bill that both eliminates taxes on current benefits and extends the fund’s solvency by 24 years would, if it becomes law, address both problems at once.
You can read more about the trust fund timeline and what it means for your retirement planning in this overview of Social Security benefits running out earlier than expected.
Where the Bill Stands and What Stands in the Way
The You Earned It, You Keep It Act is by no means guaranteed to become law and is in the earliest stages of the legislative process. After Gallego introduced it, it was sent to committee, and nothing has happened with it since then. Rep. Craig’s equivalent legislation in the House has been stuck in committee as well. She introduced previous versions of the bill in 2024 and 2022, both of which stalled in committees. Most bills never make it past that stage.
The political math is complicated by the fiscal cost. Eliminating income tax on Social Security benefits could increase the federal deficit by up to $1.5 trillion without offsetting revenue, which is why the payroll tax expansion is central to the design of the Gallego-Craig approach. Still, any bill that raises taxes on high earners faces resistance from Republicans in the current Congress, while proposals that only reduce taxes on benefits face objections over their impact on the trust fund’s solvency.
There are also competing bills with different funding mechanisms. Senators Tommy Tuberville of Alabama and Tim Sheehy of Montana introduced the Senior Citizens Tax Elimination Act (S. 458) in an effort to end what Tuberville’s office refers to as an “unjust double tax on Social Security benefits.” Unlike the Gallego bill, that version doesn’t include the payroll tax expansion to offset the cost.
At the state level, some progress is happening more quietly. Nine states currently tax Social Security benefits in 2026, including Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont, with West Virginia having recently joined the majority of states that don’t tax benefits at the state level at all.
Read More: Still Working Past 67? Here’s Exactly What Happens to Your Social Security
What This Means for You
Taxes on Social Security benefits have not been eliminated. A temporary deduction worth up to $6,000 per person runs through the 2028 tax year and will shield most, but not all, beneficiaries from owing federal taxes on their benefits. If you’re a single filer with more than $75,000 in modified adjusted gross income, or a married couple above $150,000, that deduction phases out and may not help you at all.
If the You Earned It, You Keep It Act advances, the financial relief would be meaningful. The Senior Citizens League estimates that the typical senior household would save about $3,000 annually under a full elimination of taxes on benefits. For retirees whose Social Security check is their primary income source, that gap between the current temporary deduction and a permanent full exemption is real money each year.
The most useful steps right now are practical ones. Check your combined income calculation: that’s your adjusted gross income, plus any tax-exempt interest, plus half your Social Security benefit. According to the IRS, if that total crosses $25,000 as a single filer or $34,000 as a couple, a portion of your benefit is taxable under current law. Understanding where you fall in that calculation is the first step toward knowing how much any future change would actually affect your annual tax bill. If you’re close to a threshold, a financial advisor can model whether strategies such as timing Roth conversions or adjusting distribution schedules could reduce how much of your benefit is counted as taxable income right now, regardless of what Congress decides to do next.
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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