It’s the question that keeps lighting up every retiree’s group chat and Facebook feed: is no tax on social security in the bill? Honestly, it’s about time we had a real conversation about it. For decades, the federal government has been "double-dipping" into the pockets of seniors, taxing the very benefits they already paid into through decades of payroll taxes. It feels inherently unfair. You work for forty years, you pay your dues, and then Uncle Sam shows up at the finish line asking for another cut.
Right now, the legislative landscape in Washington is shifting faster than a coastal tide. We are seeing a massive push—perhaps the most significant in a generation—to finally end the federal taxation of Social Security benefits. But let’s be real for a second. Politics is messy. Bills get introduced, they sit in committees, they get renamed, and sometimes they die quiet deaths in a senator's desk drawer. If you're looking for a simple "yes" or "no," you have to look at which specific piece of legislation we’re talking about because several are competing for the spotlight.
The Reality of Social Security Tax Laws Today
To understand the new stuff, you have to realize how broken the old stuff is. Since 1984, the federal government has used a "combined income" formula to decide if you owe taxes on your benefits. This formula is a relic. It hasn't been adjusted for inflation in forty years.
Back then, only about 10% of retirees paid taxes on their benefits. Today? It’s closer to 50%. Basically, because the thresholds of $25,000 for individuals and $32,000 for couples have stayed frozen in time while the cost of living soared, more seniors are being dragged into the tax net every single year. It’s a "stealth tax" that hits the middle class the hardest. If you earn just a little bit of extra money from a part-time job or a small 401(k) distribution, suddenly a huge chunk of your Social Security becomes taxable.
Is No Tax on Social Security in the Bill Currently Before Congress?
The short answer is: It depends on which "bill" you’re hearing about on the news. The most talked-about piece of legislation recently is the You Earned It, You Taxed It Act. This bill, championed by representatives like Angie Craig, is designed to do exactly what the name suggests. It wants to eliminate the federal income tax on Social Security benefits starting as early as next year.
But there’s a catch.
There's always a catch in D.C. To pay for the lost tax revenue—which the Social Security trust fund actually relies on—the bill proposes raising the cap on Social Security taxes for high earners. Currently, people stop paying into Social Security once they earn over a certain amount (around $168,600 in 2024, though this adjusts). This bill would lift that cap for those earning over $250,000. It’s a "tax the rich to save the seniors" play.
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Another major contender is the Social Security 2100 Act, introduced by John Larson. This one is more of a "kitchen sink" bill. It doesn't just look at taxes; it wants to increase the minimum benefit and change how cost-of-living adjustments (COLA) are calculated. It would significantly raise the thresholds before benefits are taxed, though it doesn't eliminate the tax entirely for everyone.
Why This Matters for Your 2025 and 2026 Planning
If you're sitting at your kitchen table trying to figure out your budget, this isn't just political theater. It's real money. Let's look at a hypothetical example. Say you're a retired teacher with a modest pension and Social Security. Because of that pension, 85% of your Social Security check is subject to federal income tax. If is no tax on social security in the bill becomes the law of the land, you could see an extra $2,000 to $5,000 a year in your pocket.
Think about that. That's several months of groceries. That’s the ability to actually visit the grandkids without putting the flight on a credit card.
The momentum is different this time. In the past, these bills were "performative." Politicians would introduce them to look good for voters, knowing they would never pass. But with the 2026 election cycle looming and inflation still stinging, there is a bipartisan realization that the senior vote is up for grabs. Even some Republican-led initiatives, like the Senior Citizens Tax Elimination Act, are gaining steam. It's one of the few issues where both sides of the aisle are starting to say, "Yeah, this 1984 law is pretty dumb."
The State Level vs. The Federal Level
While we wait for Congress to get its act together, the states are already moving. This is something people often miss. Even if the federal bill is still tied up in committee, your state might have already fixed this.
Currently, the majority of states—about 38 of them plus D.C.—do not tax Social Security benefits at all. Some states, like West Virginia, recently passed laws to phase out the tax completely. If you live in a state like Colorado, Minnesota, or Vermont, you might still be paying state-level taxes on that money, but even those holdouts are facing massive internal pressure to stop.
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The Economic Argument: Will it Bankrupt the System?
Critics of these bills have a valid, if scary, point. The taxes collected on Social Security benefits currently flow directly back into the Social Security Trust Funds (OASI and DI). If you stop collecting that tax, the trust funds run dry sooner.
Experts from the Committee for a Responsible Federal Budget have warned that without a way to replace that revenue, the insolvency date for Social Security could move up by two or three years. This is why the debate over is no tax on social security in the bill is so heated. It’s not just about giving seniors a break; it’s about making sure the whole system doesn’t collapse for the next generation.
Proponents argue that the "You Earned It, You Taxed It Act" solves this by taxing higher wages. By making the wealthy pay into the system on their full income (rather than capping it), they claim the trust fund would actually stay solvent for decades longer than it currently is. It's a fundamental shift in how the program is funded.
What the Experts are Saying
I reached out to some policy analysts, and the consensus is cautiously optimistic. Most believe that while a total elimination might be a hard sell in a divided Congress, a "middle ground" is likely. This would involve significantly raising the $25,000 and $32,000 thresholds to something more modern—perhaps $50,000 and $75,000.
This would effectively remove the tax burden for the vast majority of middle-income retirees while keeping some revenue coming in from the wealthiest beneficiaries. It's a compromise. And in Washington, compromise is the only thing that actually moves the needle.
How to Prepare While the Bill is Pending
Don't go out and spend that extra tax money just yet. Until the President puts pen to paper, the old rules apply. If your income is over those 1984 limits, you need to be prepared to pay.
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One thing you can do right now is check your withholdings. Many people don't realize you can actually have federal taxes withheld from your Social Security check throughout the year. It beats getting a massive bill in April. You just need to fill out IRS Form W-4V.
Also, talk to a tax professional about "tax-bracket management." If you're on the edge of the threshold, sometimes pulling a little less from your IRA and using cash savings instead can keep your Social Security from being taxed at all. It's a game of inches.
Actionable Steps for Retirees
The situation is fluid, but you aren't powerless. Here is exactly what you should be doing while the "no tax" bills work their way through the system:
- Audit your "Combined Income": Calculate your adjusted gross income + tax-exempt interest + 50% of your Social Security benefits. If that number is near $25k (single) or $32k (married), you're in the danger zone.
- Track the "You Earned It, You Taxed It Act": This is the specific bill to watch. Use sites like Congress.gov to see if it moves out of the Ways and Means Committee.
- Contact your Representative: It sounds cliché, but for Social Security issues, it actually works. Seniors are the most reliable voters. When they call, offices listen. Tell them specifically that the 1984 thresholds are hurting your ability to keep up with inflation.
- Evaluate your State Residency: If you're planning a move in 2026, look at the 12 states that still tax Social Security. Moving across a state line could save you thousands even if the federal law doesn't change.
- Review your RMDs: Required Minimum Distributions from your retirement accounts can spike your income and trigger the Social Security tax. Consider a Qualified Charitable Distribution (QCD) if you don't need the money; it lowers your taxable income.
The bottom line? The movement to end this tax has more momentum now than it has in forty years. Whether "is no tax on social security in the bill" becomes a permanent reality or a partial victory, the status quo is finally being challenged. Keep your eyes on the legislative calendar for the upcoming budget reconciliation—that’s where the real magic (or mayhem) usually happens.
Next Steps for You: Download IRS Form W-4V today to review your current withholding status. If you find that you're consistently owing money at year-end because of Social Security taxes, adjusting this form is the fastest way to avoid penalties while waiting for Congress to act. Additionally, schedule a brief 15-minute check-in with your tax preparer to model how your specific income mix would change if the federal tax thresholds were doubled—this will give you a clear "target number" for your 2026 withdrawals.