Will Retirees Stop Paying Tax on Social Security Next Year?

A proposal to end federal tax on Social Security retirement benefits would provide relief for retirees as early as next year. That’s because, as the bill is worded, federal taxes on Social Security income would be eliminated beginning in 2025 (tax returns filed in early 2026). The You Earned It, You Keep It Act is referred to as a “win-win” by its sponsor, Minnesota Rep. Angie Craig (D-Minn.).

“It's a tax cut for seniors and a way to ensure more Americans can depend on the Social Security benefits they’ve earned,” Rep. Craig said in a release.

However, this isn’t the first time lawmakers have introduced legislation to end income tax on Social Security benefits. (More on that later.) Plus, a Republican-controlled Congress and White House will have something to say, given Trump's pledge to end taxes on Social Security.

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So, will this or any other bill pass this year, and what could happen if it does? Here’s what you need to know.

Bill to eliminate tax on Social Security

Eliminating federal income tax on Social Security retirement benefits could benefit many retirees, especially those who receive other types of taxable income, such as from wages or distributions from retirement accounts. That’s because up to 85% of Social Security benefits are taxable at the federal level.

According to one analysis by the Social Security Office of the Actuary, provisions in the You Earned It, You Keep It bill would also benefit retirees (and other Social Security recipients) for decades. That’s because the bill would ensure payments could be made in full through 2054. That’s significantly longer than the current projection of the Social Security program becoming insolvent by 2034, based on a report from the Social Security and Medicare Boards of Trustees.

That same analysis finds that passing the proposed legislation would significantly reduce federal debt over the next several decades by nearly $9 trillion. That’s because eliminating the tax on Social Security benefits would be paid for by increasing taxes on higher earners.

Also, Sens. Marsha Blackburn (R-TN) and Roger Marshall (R-KS) recently reintroduced the RETIREES FIRST Act. That legislation proposes increasing the provisional income thresholds that trigger taxes on Social Security benefits, raising them to $34,000 for individuals and $68,000 for couples filing jointly.

• These figures represent a substantial increase from the current thresholds of $25,000 and $32,000, respectively.
• Given some historical context, the impact of this 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%.

By incorporating an annual inflation adjustment to these thresholds, the RETIREES FIRST Act is designed to help prevent future "bracket creep," ensuring that the proposed relief remains effective in the face of rising living costs.

If passed, this legislation could reduce the number of retirees paying taxes on their Social Security benefits.

Social Security tax increase 

Craig's proposed legislation calls for increasing the Social Security wage base, which means that high earners would help foot the bill for eliminating the federal tax on retirement benefits.

As Kiplinger reported, the Social Security tax wage base jumped 4.4% from 2024 to 2025.

• The Social Security payroll tax wage base was $168,600 last year.
• The wage base increased to $176,100 for this year, 2025.

But You Earned It, You Keep It would further increase the wage limit to over $250,000, which means that high earners could pay the 6.2% payroll tax on nearly $100,000 more of their wages.

Will the You Earned It, You Keep It bill pass? Because some provisions lack bipartisan support, it’s unlikely that You Earned It, You Keep It will pass as written. However, there is some bipartisan support for eliminating federal tax on Social Security retirement income. As mentioned, the RETIREES FIRST Act has been reintroduced, which could throw another idea into the mix.

President Trump has pledged to eliminate these taxes, which, like these proposals, aligns with providing tax relief for retirees. However, his administration hasn’t proposed a mechanism to offset the lost revenue. (A document circulated by House Republicans indicates that several popular tax breaks and family tax credits could be at risk.)

If Trump pursues his approach to ending Social Security taxes without raising revenue elsewhere, it could undermine bipartisan efforts like this act. However, aligning Trump's pledge with the funding provisions in Craig's proposal or Blackburn's bill might create an opportunity for compromise.

Of course, whether collaboration on this issue or other key tax priorities materializes in Congress remains to be seen.

State tax on Social Security in retirement

The proposed legislation only applies to federal income tax, so even if enacted, some retirees will still pay state income tax on Social Security income.

The list of states that tax Social Security has grown smaller in recent years. (Missouri and Nebraska stopped taxing Social Security, and West Virginia is phasing out its tax on Social Security income.) But nine states still tax Social Security as of 2025, one of which is Minnesota — the state Rep. Craig represents.

Related Content

• Social Security and Your Taxes: Five Things to Know
• States That Tax Social Security Benefits
• Trump's Plan to End Taxes on Social Security