WASHINGTON, D.C. – A proposed bill could potentially bring relief to retirees by eliminating federal taxes on Social Security retirement benefits beginning in 2025. The “You Earned It, You Keep It” Act, introduced by Minnesota Representative Angie Craig, aims to alleviate the burden on seniors and ensure the stability of Social Security benefits for future retirees. The bill’s provisions could potentially extend the solvency of the Social Security program through 2054, according to analysis by the Social Security Office of the Actuary.
The proposed legislation would not only benefit retirees by eliminating the federal tax on Social Security benefits but also reduce federal debt by nearly $9 trillion over the next few decades. However, this relief for retirees comes with a trade-off, as the bill calls for increasing the Social Security wage base, which places the burden of funding the tax cut on higher earners.
While the bill may not pass in its current form due to lack of bipartisan support, there is some consensus across party lines on the idea of eliminating federal tax on Social Security retirement income. However, it’s important to note that the proposed legislation only addresses federal income tax, leaving open the possibility that retirees may still be subject to state income tax on their Social Security income.
While some states have moved to eliminate state tax on Social Security income in recent years, nine states, including Minnesota, continue to tax Social Security benefits. This highlights the need for further action at the state level to provide relief for retirees from tax burdens on their Social Security income.
Overall, the proposed bill to eliminate federal tax on Social Security retirement benefits presents both opportunities and challenges for retirees, and its potential impact will be closely watched in the coming years.