- The proposed bill to end federal income tax on benefits remains pending in Congress for 2026.
- Current IRS rules still require taxing up to 85% of Social Security benefits for many retirees.
- High earners making over $250,000 could face increased payroll taxes if the legislation is enacted.
(UNITED STATES) – A bill that would end federal income tax on Social Security benefits remains pending in Congress, and nothing has changed for tax year 2026, the return most people will file in 2027.
The proposal is called the You Earned It, You Keep It Act. It was introduced in the House as H.R. 2909 and in the Senate as S. 2716. If enacted, it would repeal the federal income tax that now applies to Social Security benefits for many retirees. As of June 10, 2026, it has not been enacted, so current IRS rules still control 2026 filing.
That distinction matters because many headlines have blurred two separate issues. One is the pending bill backed in the House by Rep. Angie Craig. The other is a separate 2025 tax change that created a temporary deduction for some taxpayers age 65 and older. That deduction can reduce tax for some retirees, but it does not repeal taxation of Social Security benefits.
Current federal law taxes up to 85% of Social Security benefits for some recipients, depending on combined income. Taxpayers report benefits on Form SSA-1099 and calculate the taxable portion on Form 1040, using IRS instructions and Publication 915. Immigrants and visa holders who are U.S. tax residents face the same federal rules as other residents. IRS residency rules for noncitizens appear in [Publication 519](https://www.irs.gov/pub/irs-pdf/p519.pdf).
The proposal also reaches beyond retirees. To offset the cost, it would raise the Social Security payroll tax cap by applying payroll tax again to wages above $250,000. That means some high earners, including immigrants working on H-1B, L-1, O-1, or employment-based green cards, could pay more Social Security tax on earnings above that level if the bill became law.
Congress has not moved the bill past referral. The House version was sent to the Ways and Means Committee. The Senate version was sent to the Finance Committee. No enacted statute, IRS notice, or Treasury regulation has changed the tax treatment of Social Security benefits for 2026.
| Issue | Current law for tax year 2026 | If the You Earned It, You Keep It Act were enacted |
|---|---|---|
| Federal tax on Social Security benefits | Up to 85% of benefits can be taxable | Benefits would become federally tax-free |
| Payroll tax on wages above $250,000 | Not subject under the proposal described here | Would be subject to Social Security payroll tax again |
| Status for 2026 returns filed in 2027 | In effect now | Not in effect |
| Committee status | No change needed | Still pending in House Ways and Means and Senate Finance |
The key dates are straightforward. Rep. Angie Craig, a Democrat from Minnesota, introduced H.R. 2909 on April 14, 2025. Sen. Ruben Gallego, a Democrat from Arizona, introduced the Senate companion, S. 2716, on September 4, 2025. Those dates matter for legislative history, but they did not change any IRS filing rule.
Supporters describe the bill as a tax cut for seniors who already paid into the system during their working years. The financing method is central to that argument. Instead of leaving the repeal unfunded, the bill would subject wages above $250,000 to Social Security payroll tax again. That feature is aimed at higher earners rather than benefit recipients.
Critics focus on Social Security financing. Taxation of benefits already sends revenue into the system. Ending that tax without replacement revenue would weaken program finances. The payroll-tax adjustment is designed to answer that criticism, but Congress has not yet tested that design through markup, floor debate, or a final vote.
⚠️ Warning: Taxpayers should not stop withholding, reduce estimates, or file 2026 returns as if Social Security benefits are already tax-free. The bill has not become law.
The practical impact depends on the taxpayer’s income. A retiree with Social Security and modest pension income could owe less federal tax if the bill passed. A higher-income worker with wages above $250,000 could pay more payroll tax while still years away from collecting benefits. Those are different groups, and the bill tries to shift the cost from retirees to higher earners.
One example shows the split. A lawful permanent resident, age 68, who receives Social Security and reports part of those benefits as taxable on Form 1040, would keep more of that benefit if the proposal became law. Another example points the other way. An H-1B worker earning $320,000 could face Social Security payroll tax on wages above $250,000 under the proposal.
The separate 2025 senior deduction remains easy to misread. It can reduce or even erase federal income tax for some older taxpayers. It does not change the legal rule that Social Security benefits may be taxable. That means taxpayers preparing 2026 returns still need to follow current IRS instructions unless Congress passes a new law and the president signs it.
There is no transition relief to claim now because no new law has taken effect. The only active rule for 2026 is current law. Any future bill that passes could include an effective date, phase-in, or technical corrections, but none applies today. Until enactment, retirees, green card holders, and resident aliens should calculate tax on benefits under existing rules.
📅 Deadline Alert: Individual federal returns for tax year 2026 are generally due on April 15, 2027. Taxpayers who need forms or publications can use the IRS [forms and publications page](https://www.irs.gov/forms-pubs).
Immigrants should check status before assuming Social Security tax rules apply. A green card holder is generally a U.S. tax resident. An H-1B worker usually becomes a tax resident under the substantial presence test. Some F-1 and J-1 holders remain exempt from that count for a limited period under Publication 519. Tax residency determines whether worldwide income is reported on Form 1040, but Social Security benefit rules still follow federal law once the person is in the U.S. resident system.
Taxpayers watching this bill should follow three items next. First, any committee action in House Ways and Means or Senate Finance. Second, any amendment to the $250,000 payroll-tax threshold. Third, any stated effective date that would control which tax year the change first applies to. The IRS international taxpayer portal is at [IRS International Taxpayers](https://www.irs.gov/individuals/international-taxpayers).
If you receive Social Security benefits in 2026, keep using current law when planning withholding and estimated tax. If you earn above $250,000, watch the bill’s payroll-tax language closely. If you changed immigration status during the year, especially from F-1 to H-1B, review residency rules in Publication 519 before filing. A CPA or enrolled agent should review any return that combines Social Security, foreign income, treaty claims, or dual-status filing.
⚠️ Disclaimer: This article is for informational purposes only and does not constitute tax, legal, or financial advice. Tax situations vary based on individual circumstances. Consult a qualified tax professional or CPA for guidance specific to your situation.
