Proposed Law Eliminates Social Security Taxes by 2026: Key Insights for Retirees
In a bid to alleviate the financial burden on seniors who have worked for decades, lawmakers have introduced two bills in the U.S. Congress that aim to abolish federal taxes on Social Security benefits.
The RETIREES FIRST Act, sponsored by Sens. Marsha Blackburn (R-Tenn.) and Roger Marshall (R-Kan.), seeks to raise the provisional income thresholds that trigger taxes on Social Security benefits. If passed, this act could potentially end taxes on Social Security benefits starting in 2026, impacting income tax returns filed in 2027.
The act proposes an increase in the Social Security payroll tax wage base, affecting wages $250,000 and above. This increase would 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.
The current solvency forecast of the Social Security program is 2034. It's important to note that the percentage of recipients paying taxes on their benefits has increased significantly over the years, from under 10% to nearly 56% today. Approximately 85% of Social Security benefits can be taxable for retirees with combined income of $25,000 and higher for singles or $32,000 and higher for couples.
In parallel, Rep. Angie Craig (D-Minn.) introduced a similar bill in the U.S. House of Representatives in April. The act aims to permanently abolish federal taxes on Social Security benefits.
Sen. Marsha Blackburn stated that the RETIREES FIRST Act would cut taxes on seniors' benefits, helping them keep more of their hard-earned money. If the You Earned It, You Keep It Act passes, older adults could see an end to Social Security taxes on their 2026 tax returns.
The thresholds for taxing Social Security benefits have remained unchanged since 1984. The RETIREES FIRST Act would increase the thresholds to $34,000 for individuals and $68,000 for couples filing jointly.
The authors of the bills refer to the 'You-Earned-It, You-Keep-It' principle, a concept typically used in contexts like asset forfeiture or ownership rights, to argue that if someone earns something legally, they retain full rights to keep it. However, the precise origin or detailed context of this specific term is not clarified in available search results.
It's worth mentioning that the new GOP tax megabill contains a new $6,000 temporary tax break targeted to older adults. The increase in the Social Security payroll tax wage base would be up from the current $176,100 cap.
The You Earned It, You Keep It Act has also been introduced in the U.S. Senate by Sen. Ruben Gallego (D-Ariz.). The passage of these bills would mark a significant step towards ensuring that seniors can keep more of their retirement benefits, providing financial relief and security in their golden years.
