Washington, D.C. – A proposed bill to eliminate federal taxes on Social Security retirement benefits is making its way through Congress, offering potential relief for retirees as early as next year. The bill, known as the You Earned It, You Keep It Act, is being championed by Minnesota Rep. Angie Craig, who touts it as a “win-win” for seniors and American workers.
The bill’s provisions aim to end the federal income tax on Social Security benefits beginning in 2025, ultimately providing significant financial relief to retirees who rely on this income for their livelihood. Given that up to 85% of Social Security benefits are currently taxable at the federal level, this proposed change could have a substantial impact on the retirement finances of countless Americans.
Furthermore, an analysis by the Social Security Office of the Actuary suggests that the bill would not only benefit retirees in the short term but also ensure the solvency of the Social Security program through 2054. This optimistic projection stands in stark contrast to current estimates, which anticipate the program to become insolvent by 2034. Additionally, the proposed legislation could reduce federal debt by almost $9 trillion over the next several decades, a significant financial boon for the government.
However, the bill faces obstacles in Congress, particularly due to the lack of bipartisan support for certain provisions. Despite this, there is a glimmer of hope, as some lawmakers from both parties express support for eliminating federal taxes on Social Security retirement benefits.
It’s important to note that while the proposed legislation addresses federal income tax, it does not affect state income tax on Social Security benefits. While some states, such as Missouri and Nebraska, have recently ceased taxing Social Security, nine states still impose state taxes on this income, including Minnesota, the home state of Rep. Craig.
In the midst of ongoing discussions and debates in Congress, the fate of the You Earned It, You Keep It Act remains uncertain. However, its potential impact on retirees and the broader Social Security program is a topic of great significance and interest as policymakers weigh the bill’s potential ramifications.