President Donald Trump’s “big beautiful bill” offers assistance to specific Social Security beneficiaries who are subject to taxation on their benefits. However, it does not completely remove those levies. Sen. Ruben Gallego, D-Arizona, has put forth a legislative proposal on Thursday, named the You Earn It, You Keep It Act, aimed at abolishing taxes on Social Security benefits. In April, a House version of the bill was introduced by Representative Angie Craig, a Democrat from Minnesota.

Gallego’s bill aims to permanently abolish federal taxes on Social Security benefits. The proposal would extend the Social Security payroll tax to encompass annual earnings exceeding $250,000. The upper limit for earnings that are subject to Social Security payroll taxes stands at $176,100 for the year 2025. As a result, individuals with high incomes might contribute to the program for only a portion of the year. “Despite decades of contributions to the system, seniors continue to face taxation on their hard-earned benefits — while the ultra-wealthy contribute minimally,” Gallego stated. The amount they may owe is determined by a formula referred to as combined income, which encompasses the total of adjusted gross income, tax-exempt interest income, and fifty percent of Social Security benefits. As much as 50% of benefits could be subject to taxation for individual tax filers whose combined income falls between $25,000 and $34,000, or for married couples filing jointly with a combined income ranging from $32,000 to $44,000. Individuals with combined income exceeding $34,000 or couples surpassing $44,000 may find that up to 85% of their benefits are subject to taxation.

Individuals aged 65 and older might qualify for an extra deduction of as much as $6,000. The extent to which beneficiaries will gain from the change is contingent upon their income levels. The complete deduction will be accessible to individual taxpayers earning up to $75,000 in modified adjusted gross income, or to married couples with a combined income of up to $150,000. The deduction will be systematically reduced for taxpayers whose incomes exceed those thresholds. The temporary deduction, effective for tax years 2025 through 2028, will be accessible to eligible taxpayers irrespective of their choice between the standard deduction and itemizing their returns. Tax experts indicate that middle-income taxpayers are poised to gain the most from the policy, as low earners may already be exempt from federal taxes on benefits, while higher earners will exceed the phaseout thresholds. The U.S. Social Security Commissioner expresses no apprehension regarding future developments.
In contrast to the recently enacted temporary senior deduction, Gallego’s You Earn It, You Keep It proposal aims to abolish federal taxes on Social Security benefits for all beneficiaries.

It is yet to be determined whether sufficient backing will materialize for it to be enacted into law. The proposal enjoys backing from The Senior Citizens League, a nonpartisan organization advocating for seniors, which is urging Congress to cease the taxation of Social Security benefits. According to Shannon Benton, Executive Director of the Senior Citizens League, removing federal taxes on Social Security benefits represents a “commonsense step to ensure older Americans can keep more of what they’ve earned.” Initiatives to alter the federal taxation of Social Security benefits arise amid concerns regarding a trust fund shortfall for the program. Projections from Social Security’s trustees indicate that benefits may face reductions within the next decade unless Congress implements changes in a timely manner.

The absence of offsets for the diminished revenue from federal taxes on benefits in the “big beautiful” law is projected to hasten the depletion dates, as indicated by the Committee for a Responsible Federal Budget. In contrast, the You Earned It, You Keep It proposal would extend the Social Security trust funds’ capacity to disburse benefits in full and on schedule for 24 years, or until 2058, as stated by Gallego’s office. This aligns with an assessment of Craig’s House proposal conducted by the chief actuary of Social Security in April.