New legislation would increase the income thresholds at which Social Security payments become taxable.
The bill, H.R. 2266, the Reducing Excessive Taxation and Inefficiencies by Reforming Elder Exemptions to Support Fairness, Inflation Relief, and Simpler Taxes Act or the RETIREES FIRST Act, increases the base income amounts, above which benefits are taxed, to $34,000 from $25,000 for single filers and to $68,000 from $32,000 for married couples filing jointly. The figures would be indexed for inflation starting in 2026.
The bill, introduced by Rep. Nicole Malliotakis, R-N.Y., “would put more net income in the pockets of seniors and specifically instructs Congress to cover the cost of any revenue shortfall to the system," Jeff Bush of The Washington Update told ThinkAdvisor Tuesday.
"It’s interesting that this proposal is emerging now, especially considering that one of Donald Trump's main campaign promises was to eliminate all taxation of Social Security benefits," Bush relayed. "It may prove to be a fallback position should tax-free Social Security not make it into the final tax bill."
Under the RETIREES FIRST Act, all retirees with income above the base amount would pay income tax on up to 85% of their benefits, eliminating the threshold in current law under which retirees are taxed on up to 50% of their benefits.
Malliotakis introduced a similar bill, the Tax Relief Unleashed for Seniors by Trump (TRUST) Act, H.R. 1129, in early March. That bill would keep the 50% and 85% thresholds while raising the base amounts.
The new RETIREES FIRST bill "also appears to have a zero [income exemption] threshold for those married and filing separately," said Dan Adcock, director of government relations for the National Committee to Preserve Social Security and Medicare.
"This probably means if you are in the ‘married, filing separately’ category, 85% of every dollar of your income is subject to income tax," Adcock said. "This seems to punish people who are married and filing separate returns."
The Committee "never supports bills that change the earned nature of Social Security, which this bill does by back filling the money lost to the Social Security Trust Funds with appropriated amounts — not payroll taxes," Adcock said.
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