A NEWLY proposed bill could possibly eliminate all taxes on Social Security benefits.
The bill, proposed in the Senate by Sen. Ruben Gallego, aims to cut federal taxes on Social Security benefits without impacting the Social Security Trust Fund.
“Like a lot of Americans, I’ve been paying into Social Security since my first job at fourteen,” Gallego said.
“But despite decades of paying into the system, seniors are still forced to pay taxes on their hard-earned benefits – all while the ultra-wealthy [barely] pay into the system at all.”
The bill, titled the “You Earn It, You Keep It Act,” would expand the Social Security payroll tax to cover annual earnings over $250,000, ensuring that “high-earners pay their fair share.”
The current maximum earnings is $176,100.
Gallego’s bill could help retirees keep more of the benefits, which could be used toward essential needs like housing and food.
The bill could also be helpful to recipients who have additional income sources like pensions and part-time work that push them into the taxable thresholds for Social Security.
The new policy is separate to Trump’s push to eliminate taxes on Social Security benefits as part of his Big Beautiful Bill passed earlier this year.
While Trump’s bill provided some tax relief to Social Security recipients aged 65 and over, experts warned its impact was overstated.
For example, the deductions introduced in Trump’s bill were not permanent as they were only in effect from 2025 to 2028.
About 8% of seniors will benefit from Trumps bill, which allows recipients who file as a single can claim an additional deduction of up to $6,000.
Trump’s Big Beautiful Bill and Senator Gallego’s new bill both seek to reduce taxes on Social Security during an stressful time for recipients amid escalating fears about the sustainability of the program.
There is growing concern about what will happen over the next few years, with the Social Security system facing a shortfall which policy experts say requires legislative intervention.
The current projection for Social Security payments is through 2034, with 81% of the benefits payable by then, according to the SSA.
If the trust fund runs out of money, benefits for over 60 million retirees and their family members will be immediately cut by 23%, NPR reported.
According to Gallego’s calculations, his new bill would also allow the Social Security Administration to continue issuing full payments through 2058.
Following the passage of Trump’s Big beautiful Bill, policy experts told CBS MoneyWatch the wording of the bill was misleading.
Experts said that while the bill offered tax relief for some recipients, it doesn’t entirely take away taxes on Social Security benefits.
HOW TO SUPPLEMENT YOUR SOCIAL SECURITY
Here’s how to supplement your Social Security:
Given the uncertainty surrounding Social Security’s long-term future, it’s essential for workers to consider ways to supplement their retirement income.
Senior Citizens League executive director, Shannon Benton recommends starting early with savings and investing in retirement accounts like 401(k)s or IRAs.
- 401(k) Plans
- A 401(k) is a retirement account offered through employers, where contributions are tax-deferred.
- Many employers also match employee contributions, typically between 2% and 4% of salary, making it a valuable tool for building retirement savings.
- Maxing out your 401(k) contributions, especially if your employer offers a match, should be a priority.
- IRAs
- An Individual Retirement Account (IRA) offers another avenue for retirement savings.
- Unlike a 401(k), an IRA isn’t tied to your employer, giving you more flexibility in your investment choices.
- Contributions to traditional IRAs are tax-deductible, and the funds grow tax-free until they are withdrawn, at which point they are taxed as income.
Instead, the Big Beautiful Bill offered a new “bonus” tax deduction for beneficiaries.
“While the deduction does provide some relief for seniors, it’s far from completely repealing the tax on their benefits,” Garrett Watson, the director of policy analysis at the Tax Foundation, said in an interview with the Associated Press.
The Council of Economic Advisers said in a White House release that the new $6,000 deduction would benefit nearly 34 million seniors, “including seniors not claiming Social Security.”
