A new proposal could bring a major shake-up to Social Security funding. This change might impact millions of retirees and future beneficiaries.

Could it reshape the future of your retirement?


The bill, introduced by Representative Angie Craig and dubbed the You Earned It, You Keep It Act, seeks to simplify the retirement payment process by altering the way Social Security benefits are taxed.

Currently, Social Security benefits are subject to state income tax, but under this new legislation, that would no longer be the case.

The bill proposes a gradual phase-out of the Social Security income tax over eight years, starting the following year and concluding in 2034.


As it stands, individuals earning less than $50,000 and couples earning less than $65,000 are exempt from paying taxes on their Social Security benefits.

However, the new bill could extend this tax break to more Americans, potentially increasing the disposable income of retirees.


The You Earned It, You Keep It Act contains two primary provisions that aim to address the financial health of the Social Security system while providing relief to beneficiaries:

1. Federal income tax exemption for Social Security benefits​

This provision would eliminate federal income tax on Social Security benefits, allowing retirees to keep more of what they've earned throughout their working lives.

2. Social Security payroll tax assessment for high-income earners​

The bill proposes that individuals with incomes of at least $250,000 should contribute more to the Social Security trust fund through payroll taxes.

Currently, payroll taxes for Social Security are collected on earnings up to $176,100, with the tax split between employers and employees. Self-employed individuals bear the full cost.

The proposed change would create a “doughnut hole” where income between $176,101 and $249,999 would not be subject to Social Security payroll taxes, but earnings above $250,000 would be taxed.


The Old-Age and Survivors Insurance Trust Fund, which provides retirement benefits, is projected to reach its reserve limit by 2033.

At that time, the Social Security system is expected to cover 79% of scheduled retirement benefits.

The proposed bill seeks to strengthen the trust fund by adjusting contributions from higher-income earners, with the goal of extending its financial stability.

The bill has received mixed reactions and faces legislative challenges.

It is currently under consideration by the House Ways and Means Committee and the House Committee on Energy and Commerce.

If you're among the millions of Americans planning for retirement or already enjoying your post-work years, this bill could have direct implications for your financial well-being.

The potential for increased disposable income through tax exemptions on Social Security benefits is an enticing prospect.

However, it's essential to stay abreast of the bill's progress and prepare for any changes that may come.
Have you considered how changes to Social Security taxation might affect your retirement plans? Share your insights with us in the comments below.