Senator Ruben Gallego has introduced a new bill titled the “You Earn It, You Keep It Act,” which seeks to eliminate federal taxes on Social Security benefits. This legislation comes at a time when millions of Social Security beneficiaries are facing tax burdens. These taxes can seriously reduce what little money seniors have coming in each month. The reintroduced bill would provide long-term relief for these beneficiaries on a permanent basis. It addresses the issues related to the tax burden on seniors.
Social Security recipients most likely will be required to pay federal income taxes on the benefits they’ve earned. Typically, this is based on a formula known as combined income. This calculation takes into account AGI, tax-exempt interest income, and half of the individual’s Social Security benefits. For single filers, up to 50% of benefits may be taxed if their combined income falls between $25,000 and $34,000. Similarly, married couples filing jointly may find themselves taxed on their benefits. This often occurs when their joint income is between $32,000 and $44,000. For individuals with combined incomes over these limits, as much as 85% of their benefits may be subject to the income tax.
The introduction of Gallego’s bill is important because it’s the start of a greater movement to reduce the financial burden on seniors. He made the case for this shift beautifully when he said,
“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.”
Along with Gallego’s proposal, President Donald Trump has released a short-term proposal to offer some immediate relief. Specifically this “big beautiful bill.” This deduction in the bill. Eligible taxpayers can still get a piece of it in tax years 2025 to 2028. This new temporary deduction is available even for taxpayers who take the standard deduction rather than itemizing their returns.
Under Trump’s plan, seniors age 65 and older would be able to take an extra senior deduction worth up to $6,000. Individual taxpayers with modified adjusted gross incomes of $75,000 or less are eligible for the full deduction. Married couples with incomes less than $150,000 will be able to take advantage of this provision.
Even with these short-term band-aids, some people express worry over the ability of Social Security to continue providing benefits in the future. According to Social Security’s trustees, those reductions could come as soon as 2034. Here’s why Congress has to act quickly to make sure that doesn’t happen.
Shannon Benton, Executive Director of the Senior Citizens League, in support of Gallego’s bill as a
“commonsense step to ensure older Americans can keep more of what they’ve earned.”
Advocates for seniors have become increasingly alarmed about current taxation policies. They argue that these policies unfairly target older Americans who rely on Social Security as their main source of income.
The proposed legislation aims to provide a more stable financial future for Social Security recipients by ensuring they retain more of their earned benefits. The debate to reform America’s Social Security system and America’s tax code is intensifying. Gallego’s initiative, if adopted widely, could be a major answer to the troubling predicament many American seniors find themselves in.