Summary#
This bill changes how much of a person's Social Security benefits can be included in federal taxable income. It sets new "base amounts" that are used to decide when benefits become taxable: $34,000 for most single filers, $68,000 for joint filers, and $0 for certain married taxpayers who file separately and live with their spouse. The bill says up to 85% of benefits (or 85% of the excess over the base amount) may be included in income. The base amounts are indexed for inflation starting after 2025. The change applies to tax years beginning after December 31, 2025.
The bill also includes two budget provisions. First, it directs the Treasury to appropriate to each Social Security or Railroad Retirement fund an amount equal to any reduction in transfers to that fund caused by the tax changes (it says the trust funds are "held harmless"). Second, starting in fiscal year 2027 the bill rescinds, on a pro rata basis, amounts from regular (non-security) discretionary appropriations equal to the total cost of the change, as determined by the Treasury. The bill requires the Director of OMB to publish an annual report on any rescissions.
What it means for you#
- If you receive Social Security, this bill changes the income levels used to decide whether and how much of your benefits are taxed. The bill sets specific dollar thresholds ($34,000 single, $68,000 joint) and says up to 85% of benefits may be counted as taxable income.
- The new thresholds rise with inflation beginning after 2025.
- The tax change applies to tax years starting after December 31, 2025.
- The bill also directs the Treasury to make up any reduction in transfers to Social Security and Railroad Retirement funds, and it requires budget offsets taken from non-security discretionary appropriations starting in fiscal year 2027.
Expenses#
- The bill directs the Treasury to appropriate amounts to each Social Security and Railroad Retirement fund equal to any reduction in transfers to those funds caused by the tax changes. That is, the bill says the trust funds will be made whole for reductions in transfers.
- To offset that cost, the bill requires rescinding, for each fiscal year beginning in fiscal year 2027, an amount equal to the total cost (as determined by the Secretary of the Treasury) from regular discretionary appropriations on a pro rata basis, excluding appropriations in the security category.
- The bill does not specify dollar amounts in the text. No publicly available information on total dollar costs is included in the bill text provided.
Proponents' View#
- The bill's short title and text present it as a change to reduce what it describes as excessive taxation on retirees and to provide fairness, inflation relief, and simpler taxes by raising the income thresholds and indexing them for inflation.
Opponents' View#
- No publicly available information in the provided bill text about opponents' views.