Proposal Ends Federal Tax on Benefits
A new proposal in Congress, the You Earned It You Keep It Act, could bring bigger Social Security checks to retirees starting in 2026. The bill, introduced by Rep. Josh Riley, would eliminate federal taxes on Social Security retirement benefits, allowing seniors to keep the full value of what they paid into the system throughout their working lives.
Currently, the federal government can tax up to 85% of Social Security benefits, depending on a retiree’s income. This policy often reduces monthly income for middle-class retirees living on fixed budgets. If the new legislation passes, nearly 90% of recipients would see their income rise, giving seniors more financial stability.
How It Would Work
Under the plan, retirees would no longer need to calculate “combined income” or watch part of their checks disappear to federal taxes. Instead, all benefits would be tax-free. To offset the loss in tax revenue, the proposal raises the payroll tax cap. Currently, Social Security payroll taxes only apply to wages up to about $176,000 in 2025. The new bill would extend payroll taxes to anyone earning more than $250,000 annually.
This change would ensure the program remains funded while delivering immediate relief to retirees, shifting more responsibility onto higher-income earners.
Why It Matters for Retirees
For many seniors, Social Security is more than just supplemental income—it is their main resource for housing, healthcare, and basic living costs. Riley emphasized the fairness of the proposal: “Seniors paid into Social Security their entire lives. It doesn’t make any sense to tax them on the benefits they earned.”
Removing federal taxes would make benefit amounts more predictable and easier to budget. While the increases may be modest month to month, they could significantly impact retirees with limited financial resources.
It is important to note, however, that this bill would not affect state-level taxes. Social Security benefits remain taxable in certain states, depending on local laws.
Next Steps in Congress
The proposal still needs to pass through Congress before becoming law. While it has strong appeal among retirees and advocates, some critics question whether the program’s long-term funding could face risks. Supporters argue that higher contributions from wealthier earners will keep Social Security strong for future generations.
If enacted, 2026 could mark a historic shift in Social Security, delivering larger benefit checks, reducing financial stress for seniors, and reinforcing the program’s role as a lifeline for millions. Meanwhile, high earners may face new payroll tax obligations to help sustain the system.
