For decades, U.S. taxpayers have paid into Social Security with each paycheck, only to discover later that up to 85% of those hard-earned benefits can be taxed again in retirement.
So, many retirees wondered whether 2025 would be the year that Congress would finally pass legislation to provide some relief. That question was amplified, for some, by President Donald Trump’s recent campaign pledge to eliminate taxes on Social Security benefits in his second term.
However, despite what you may have heard, the GOP mega tax bill signed into law by Trump on July 4, 2025, doesn’t change Social Security taxation.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.
Profit and prosper with the best of expert advice – straight to your e-mail.
But…now there’s another push to erase taxes on Social Security as soon as next year. It’s called the You Earned It, You Keep It Act, and here’s what it could mean for retirees.
What Is the ‘You Earned It, You Keep It’ Act?
On September 4, Sen. Ruben Gallego (D-Ariz.), joined by Rep. Angie Craig of Minnesota, who introduced a parallel bill in the U.S. House of Representatives in April, unveiled the ‘You Earned It, You Keep It’ Act in the U.S. Senate.
- The bill would permanently abolish federal taxes on Social Security benefits.
- Unlike prior measures, which would chip away at taxes or raise income brackets, this bill calls for a full repeal.
- If Congress passes the act this year, taxes on Social Security benefits would end starting in 2026 — impacting income tax returns filed in early 2027.
“Like a lot of Americans, I’ve been paying into Social Security since my first job at fourteen. But despite decades of paying into the system, seniors are still forced to pay taxes on their hard-earned benefits – all while the ultra-wealthy barely pay into the system at all,” Gallego stated in a release regarding the bill.
“Trump claimed he ended taxes on Social Security. My bill actually does it. Permanently,” Gallego added.
To pay for this tax relief and safeguard Social Security’s long-term stability, the bill proposes an increase in the Social Security payroll tax wage base (also known as the tax limit). If approved, starting in 2026, all wages above $250,000 would be subject to the 6.2% payroll tax, up from this year’s $176,100 cap.
That means higher earners would continue contributing, helping offset the lost revenue from retiree tax cuts and extending 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. That is well beyond the program’s current solvency forecast of 2034.
Why are Social Security Benefits taxed and why the push for change?
- Right now, up to 85% of Social Security benefits can be taxable for retirees whose combined income (adjusted gross income plus tax-free interest and half of their Social Security benefits) exceeds $25,000 for singles or $32,000 for couples.
- As Kiplinger has reported, these SS thresholds have remained unchanged since 1984, while the percentage of recipients paying some tax has increased from under 10% to nearly 56% today.
- Some lawmakers from both parties argue the tax penalizes those who have worked for decades. With inflation biting into retirement budgets, a growing number of representatives cite fairness in calls for a tax repeal.
Since a sticking point when it comes to taxes on SS is the loss of federal revenue, other proposals, like the RETIREES FIRST Act, raise income thresholds instead of eliminating taxes.
That legislation, introduced by Sens. Marsha Blackburn (R-Tenn.) and Roger Marshall (R-Kan.), would increase the provisional income thresholds that trigger taxes on Social Security benefits. It would raise them to $34,000 for individuals and $68,000 for couples filing jointly. (The current thresholds of $25,000 and $32,000, respectively.)
“Retirees across the country depend on Social Security, especially after enduring the record-high inflation of the last four years,” Blackburn stated in a press release, adding, “This bill would cut taxes on seniors’ benefits, helping them keep more of their hard-earned money.”
Given some historical context, the impact of such a change could be significant.
- In 1984, less than 10% of Social Security beneficiaries paid taxes on their benefits.
- Today, that figure has risen to nearly 56%.
So, supporters say incorporating an annual inflation adjustment to the thresholds could help prevent future “bracket creep.”
Social Security taxes: What should retirees expect next year?
If the ‘You Earned It, You Keep It’ Act passes this fall, older adults could see an end to Social Security taxes on their 2026 tax returns, typically filed in early 2027. But passage remains uncertain, with negotiations and highly partisan political bargaining always a factor on Capitol Hill.
Still, for millions of U.S. taxpayers who see Social Security as a benefit they earned through hard work, it’s a tax debate worth watching.
In the meantime, the new GOP tax megabill contains a new $6,000 temporary tax break targeted to older adults. For more information, see our report: How the New Senior Bonus Tax Deduction Works.
