For decades, retirees have watched cost-of-living increases lift their Social Security checks, only to see a chunk clawed back at tax time. A new proposal in Congress would upend that pattern by scrapping federal income taxes on benefits altogether and reshaping how the program is funded. The stakes are enormous for the roughly 75 m Americans who rely on Social Security as a core source of retirement income, especially as benefit formulas and tax rules shift again in 2026.
I want to walk through what the new bill would actually do, how it fits into the broader wave of Social Security changes, and what it could mean for your tax bill in the next few years.
What the You Earned It, You Keep It Act would change
The centerpiece of the debate is H.R. 2909, formally titled the Earned It, You, which has been introduced in Congress as part of the 119th Congress. The bill’s core promise is simple but sweeping: it would permanently abolish federal income taxes on Social Security benefits so that retirees keep every dollar of their monthly check. Reporting on the proposal explains that under current law, up to 85 percent of Social Security benefits can be subject to federal income tax depending on your other income, a structure the bill’s sponsors argue punishes people for saving and working in retirement.
Supporters frame the measure as a fairness fix and a middle-class tax cut. A detailed breakdown of the proposal notes that the bill would end the current inclusion of benefits in taxable income and instead rely more heavily on payroll taxes paid by higher earners to keep the system solvent. Another analysis of what the legislation would change underscores that if it passes, nobody would owe federal income tax on their Social Security benefits, while higher wages would face increased taxes that fund the program, a tradeoff laid out in detail in a separate review of what the bill.
How Social Security is taxed today
To understand how dramatic that shift would be, it helps to look at the current rules. Under existing law, up to 85 percent of Social Security benefits can be taxed by the federal government, with the exact share determined by your combined income from benefits, wages, pensions and investments. A detailed explainer on why the issue matters notes that this 85 percent ceiling hits many middle-income retirees, especially couples with modest pensions or part-time work, and that the thresholds at which benefits become taxable have not been indexed to inflation, pulling more people into the tax net over time, a point underscored in a piece labeled Why It Matters.
Despite a wave of tax changes that took effect in 2026, the basic structure of Social Security taxation has not yet been repealed. A technical briefing on the 2025 Act, also referred to as the One Big Beautiful Bill Act, makes clear that, since the passage of the 2025 Act, Social Security tax rules remained unchanged even as a new senior deduction was added, a point spelled out in the Background section. Another practitioner-focused guide aimed at people Wondering whether Social Security is taxed in 2026 walks through the same federal income rules, state-level taxes and income thresholds, and notes that only a change like the You Earned It, You Keep It Act would fully remove federal taxation of benefits.
The new bill’s political and policy backers
The push to end federal taxes on benefits is not happening in a vacuum. In WEST ST. PAUL, Representative Angie Craig used a local event to announce new legislation to eliminate federal taxes on Social Security benefits, arguing that the bill would help improve Social Security and put more money back into the pockets of middle-class Americans, according to a detailed Today release from her office. That same communication stresses that Representative Angie Craig sees Social Security as a promise that should not be eroded by surprise tax bills in retirement.
Her advocacy dovetails with broader coverage from her office that highlights how taxes on Social Security could be eliminated under the new bill and reiterates that up to 85 percent of benefits can currently be taxed, a figure repeated in the Why It Matters explainer. The political case is that retirees have already paid into the system through payroll taxes and should not face a second layer of federal income tax on the back end, a message that has resonated with older voters who are also watching other parts of the tax code shift under the One Big Beautiful Bill Act, a law referenced in multiple analyses of Tax Law Changes.
How this fits into the 2026 Social Security shake-up
Even without the new bill, 2026 is already a turning point for the program. As of January, several changes to Social Security took effect, affecting everything from benefit formulas to how much income is subject to payroll tax, as laid out in a retirement-focused overview that opens with the line As of January. Another summary aimed at investors notes that Kiplinger Invest for Retirement has been tracking how, as of January 1, 2026, several changes to Social Security took effect, reinforcing that the landscape is already shifting for new and current beneficiaries, a point repeated in the Kiplinger Invest for coverage.
On the benefit side, the Social Security Administration delivered a 2.8% cost-of-living adjustment, or COLA, for 2026, a figure highlighted in a consumer explainer that notes the Cost-of-living adjustment rises and credits The Social Security Administration for the 2.8% increase in COLA for 202, a shorthand reference in the Cost discussion. Official Cost, Living Adjustment, COLA, Information for Social Security and Supplemental Security Income, SSI from the agency confirms that Social Security and Supplemental Security Income benefits for 75 m recipients are adjusted using the same inflation formula, a detail spelled out in the Cost of Living Adjustment page. A separate look at how these changes hit households notes that Collecting Social Security in 2026 means roughly 75 m Americans will receive a 2.8% boost, tying the official figures to real-world budgets in the Collecting Social Security analysis.
Payroll taxes, high earners and the One Big Beautiful Bill Act
Any move to stop taxing benefits has to grapple with how Social Security is funded, and here the 2026 changes are crucial. A technical note on 2026 Social Security Tax Changes explains that high earners face higher payroll tax exposure, with the piece titled Social Security Tax Changes, What High, Income Earners Need To Know detailing how, after a year of market swings and slowly creeping inflation, more wages will be taxed at 6.2 percent for Social Security, a point summarized in the Social Security Tax coverage. Another advisory for high-net-worth individuals notes in its Key Points that Maximum Taxable Earnings Rise to $184,500, describing this as a Direct increase in Federal Insurance Contributions Act, FICA payroll taxes, a change spelled out in the Key Points summary.
Those payroll changes sit on top of a broader tax-code overhaul. A planning memo on 2026 Tax and Social Security Changes notes that Tax Law Changes in 2026 stem from a major overhaul of the U.S. tax code commonly referred to as the One Big Beautiful Bill Act, which took effect and reshaped brackets, deductions and credits, as described in the Tax Law Changes overview. A separate explainer on what passage of the One Big Beautiful Bill Act means for retirees notes that, according to the White House, this new deduction, in addition to the existing standard deductions, will cover the tax collected on Social Security benefits for many households, and that the law defines how your “combined income” is calculated for benefit taxation, details laid out in the According analysis.
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*This article was researched with the help of AI, with human editors creating the final content.
Nathaniel Cross focuses on retirement planning, employer benefits, and long-term income security. His writing covers pensions, social programs, investment vehicles, and strategies designed to protect financial independence later in life. At The Daily Overview, Nathaniel provides practical insight to help readers plan with confidence and foresight.
