A proposal to end federal tax on Social Security retirement benefits would provide relief for retirees as early as next year. That’s because, as the bill is worded, federal taxes on Social Security income would be eliminated beginning in 2025 (tax returns filed in early 2026). The You Earned It, You Keep It Act is referred to as a “win-win” by its sponsor, Minnesota Rep. Angie Craig (D-Minn.).
“It’s a tax cut for seniors and a way to ensure more Americans can depend on the Social Security benefits they’ve earned,” Rep. Craig said in a release.
However, this isn’t the first time lawmakers have introduced legislation to end income tax on Social Security benefits. So, will this bill pass this year, and what could happen if it does? Here’s what you need to know.
Bill to eliminate tax on Social Security
Eliminating federal income tax on Social Security retirement benefits could benefit many retirees, especially those who receive other types of taxable income , such as from wages or distributions from retirement accounts. That’s because up to 85% of Social Security benefits are taxable at the federal level.