This bill changes how Social Security benefits are counted for federal income tax. It amends section 86 of the Internal Revenue Code so that gross income includes Social Security benefits equal to the lesser of 85% of benefits received or 85% of the excess calculated under the section. It sets the base amounts used in that calculation to $34,000 for single filers, $68,000 for joint filers, and $0 for taxpayers who are married and file separately while living with their spouse. Those dollar amounts will be adjusted for inflation for tax years beginning after 2025 and rounded to the nearest $1,000. The tax changes apply to taxable years beginning after December 31, 2025. The bill also includes an appropriation to make up any reductions in transfers to Social Security and Railroad Retirement trust funds caused by these changes.
Section 3 directs that, beginning in fiscal year 2027, an amount equal to the "total cost" of the tax changes (defined as the reduction in transfers to the trust funds caused by the new thresholds) be rescinded on a pro rata basis from non-security discretionary appropriations. The rescission does not apply to discretionary appropriations in the security category. The Treasury Secretary will determine the total cost, and the Office of Management and Budget must publish an annual report on any rescissions starting January 1, 2028.
If you receive Social Security benefits, the bill raises the income thresholds used to decide whether those benefits count as taxable income. That means some people with income below the new thresholds may have less or none of their Social Security benefits included in their federal taxable income. The bill sets the new threshold dollar amounts, adjusts them for inflation after 2025, and takes effect for tax years starting after December 31, 2025. The bill also instructs the Treasury and OMB to handle and report on the budget effects of those changes.
The bill appropriates funds to replace any reductions in transfers to Social Security and Railroad Retirement trust funds caused by the tax changes. To pay for those replacement amounts, the bill requires rescinding an amount equal to the "total cost" from non-security discretionary appropriations on a pro rata basis starting in fiscal year 2027. The security category of discretionary appropriations is excluded. The Treasury determines the total cost, and OMB must report annually on rescissions. No publicly available information on estimated dollar amounts or net fiscal effects is included in the bill text.
No publicly available information.
No publicly available information.