The bill did not pass Congress

The No Tax on Social Security Act has been introduced in Congress multiple times but has not become law. The most recent version was introduced in 2023, but it did not advance far enough to reach a vote in either the House or Senate. Without passage in both chambers and a presidential signature, the bill remains a proposal rather than a change to current tax law.

Social Security benefits remain taxable income under the current rules that have been in place since 1983. Depending on your total income, between 0% and 85% of your Social Security benefits may be subject to federal income tax. This has not changed, and no recent legislation has altered this structure.

Key Takeaways

  • The No Tax on Social Security Act has been proposed but has not passed into law, so current tax rules on Social Security remain unchanged.
  • Under current law, up to 85% of your Social Security benefits can be taxable depending on your combined income from all sources.
  • The bill would have eliminated federal income tax on Social Security benefits entirely if it had passed.
  • You should plan your retirement income around the current tax rules, not a proposed bill that may never become law.

How Social Security is taxed right now

The amount of your Social Security that is taxable depends on your combined income, which includes your adjusted gross income, nontaxable interest, and half of your Social Security benefits. The IRS uses two thresholds to determine the tax amount.

If you file as single and your combined income is between $25,000 and $34,000, you may owe tax on up to 50% of your benefits. If your combined income exceeds $34,000, you may owe tax on up to 85% of your benefits. For married couples filing jointly, the thresholds are $32,000 and $44,000. These thresholds have not changed since 1983.

Not all retirees pay tax on Social Security. If your combined income is below the first threshold for your filing status, none of your benefits are taxable. Many people who receive only Social Security and have no other income fall into this group.

What the No Tax on Social Security Act would have done

If the bill had passed, it would have eliminated federal income tax on all Social Security benefits for all recipients. This would mean that no matter how much other income you had, your Social Security check would never be counted as taxable income on your federal return.

The bill would not have changed state income taxes on Social Security. Some states already do not tax Social Security benefits, while others do. A federal change would not affect state rules.

The bill also would not have changed how Social Security is funded or how much you receive each month. It would only have changed the tax treatment of the money after you receive it.

Why the bill has not passed

Congress has not voted the bill into law because it faces disagreement over cost and budget priorities. Eliminating tax on Social Security would reduce federal tax revenue, and lawmakers have different views on whether that trade-off is worth making compared to other spending or tax priorities.

The bill has had bipartisan support from individual members in both parties, but that support has not been strong enough to move it through committee or to a floor vote. Legislative priorities change with each new Congress, and bills that do not pass in one session must be reintroduced in the next.

How to plan around current tax rules

Since the bill has not passed and current tax law remains in effect, you should plan your retirement income with the understanding that some of your Social Security may be taxable. If you have other income sources — such as a pension, investment income, or part-time work — those will increase your combined income and may push more of your Social Security into the taxable range.

You can estimate your tax liability by calculating your combined income and checking which threshold you fall into. The Social Security Administration provides a worksheet on its website to help you do this. Some people choose to have taxes withheld from their Social Security check each month to avoid a large tax bill at the end of the year.

If you are still working and receiving Social Security before your full retirement age, you should also know that earned income affects your benefits differently than investment income does. The earnings test reduces your benefit amount if you earn above a certain threshold, though this rule changes once you reach full retirement age.

What could change in the future

Congress could pass a version of this bill or a similar proposal at any time, but there is no current timeline or indication that this will happen soon. Tax law changes require new legislation, and any change would explore only to tax years after the law takes effect.

If you are planning your retirement, do not assume that a bill that has not passed will change your tax situation. Plan based on the rules that exist now. If tax law does change in the future, you can adjust your strategy at that time.

Frequently Asked Questions

Is Social Security taxable right now?

Yes. Depending on your combined income, between 0% and 85% of your Social Security benefits may be subject to federal income tax. The thresholds are $25,000 to $34,000 for single filers and $32,000 to $44,000 for married couples filing jointly.

When did Social Security become taxable?

Social Security benefits became taxable in 1983 as part of amendments to the Social Security Act. Before that year, benefits were not counted as income for tax purposes.

Can I avoid paying tax on Social Security?

If your combined income is below the first threshold for your filing status, you will not owe tax on your benefits. Otherwise, you cannot avoid the tax, but you can choose to have it withheld from your monthly check to spread the cost throughout the year.

Do all states tax Social Security?

No. Some states do not tax Social Security benefits at all, while others tax them the same way the federal government does. State rules vary, so check your state's tax rules if you live outside the federal system.

What should I do if I think I owe tax on Social Security?

Calculate your combined income using the IRS worksheet, then determine which tax bracket you fall into. You can request withholding from your Social Security check by contacting the Social Security Administration, or you can pay estimated taxes quarterly if you prefer.