You Earn It, You Keep It: New Bill Would End Taxes On Social Security Benefits

Thu, Sep 11, 2025, 12:31 PM 4 min read

A new bill in Congress could permanently eliminate federal taxes on Social Security benefits — a change that would impact millions of retirees. The You Earn It, You Keep It Act would also strengthen the program's trust funds by requiring higher earners to contribute more.

Rep. Angie Craig (D-MN) first introduced the legislation in 2024, and Sen. Ruben Gallego (D-AZ) introduced a Senate version last week. The proposal arrives just months after President Donald Trump signed the One Big Beautiful Bill Act, which includes a provision that created a temporary tax deduction for seniors. While that measure offered some relief, it did not remove federal taxes on Social Security benefits altogether.

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Currently, many retirees may owe federal income tax on their Social Security, depending on overall income. Taxes are based on a formula known as "combined income," which includes adjusted gross income, tax-exempt interest, and half of Social Security benefits.

• Individuals with combined income of $25,000 to $34,000 may pay tax on up to 50% of benefits.

• Married couples filing jointly with $32,000 to $44,000 face the same threshold.

• Higher earners — above $34,000 for singles or $44,000 for couples — may pay tax on up to 85% of their benefits.

Gallego's legislation would permanently eliminate federal income taxes on Social Security benefits. To offset the loss of revenue, the bill would expand the Social Security payroll tax so that it applies to annual wages above $250,000. In 2025, only earnings up to $176,100 are subject to the payroll tax.

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According to Gallego's office and an earlier analysis from the Social Security Administration's chief actuary, the change would extend the program's ability to pay full benefits until 2058 — 24 years beyond the current projection of 2034.

Several senior advocacy groups have voiced strong support. "Eliminating federal taxes on Social Security benefits is a commonsense step to ensure older Americans can keep more of what they've earned," Shannon Benton, executive director of The Senior Citizens League, said in Gallego's statement.