For decades, U.S. taxpayers have contributed to Social Security with every paycheck, only to face the reality that up to 85% of those benefits may still be taxed in retirement.
Many retirees hoped 2025 would finally bring legislation offering some relief. That hope grew stronger after President Donald Trump’s recent campaign promise to eliminate taxes on Social Security benefits if he secured a second term.
Yet, despite the buzz, the GOP’s sweeping tax bill that Trump signed into law on July 4, 2025, leaves Social Security taxation unchanged.
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 (D-Minn.), who introduced a parallel bill in the U.S. House of Representatives in April, unveiled the You Earned It, You Keep It Act (PDF) 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 2027.
“Like many Americans, I’ve been paying into Social Security since my first job at 14. Yet after decades of contributions, seniors are still forced to pay taxes on their hard-earned benefits — while the ultra-wealthy contribute very little,” Gallego said in a release about the bill.
“Trump claimed he ended taxes on Social Security. My bill actually does it. Permanently,” Gallego continued.
To fund this tax relief and protect Social Security’s long-term stability, the bill calls for raising the Social Security payroll tax wage base (also known as the tax limit). If approved, beginning in 2026, all wages of \$250,000 and above would face the 6.2% payroll tax, up from the current \$176,100 cap.
This change would require higher earners to keep contributing, helping replace the revenue lost from retiree tax cuts and extending the trust fund’s solvency by decades.
Projections show this plan would allow the Social Security Administration (SSA) to continue payments until at least 2058 — far beyond the program’s current solvency outlook 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) of $25,000 and higher for singles or $32,000 and higher for couples.
- As 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 that 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 one of the biggest challenges with Social Security taxation is the loss of federal revenue, other proposals — like the RETIREES FIRST Act (PDF) — focus on raising income thresholds instead of eliminating taxes.
This 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. The bill proposes raising them to $34,000 for individuals and $68,000 for couples filing jointly, compared with the current thresholds of $25,000 and $32,000.
“Retirees across the country depend on Social Security, especially after enduring the record-high inflation of the last four years,” Blackburn said in a press release. “This bill would cut taxes on seniors’ benefits, helping them keep more of their hard-earned money.”
Looking at the history, the potential impact of such a change is clear:
- In 1984, fewer than 10% of Social Security beneficiaries paid taxes on their benefits.
- Today, that share has climbed to nearly 56%.
Supporters argue that tying the thresholds to annual inflation 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, retirees could see an end to Social Security taxes on their 2026 tax returns, typically filed in early 2027. However, its passage remains uncertain, as partisan negotiations and political manoeuvring continue on Capitol Hill.
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