S. 2716, the You Earned It, You Keep It Act, would eliminate federal income taxes on Social Security benefits and cap the annual wages subject to Social Security payroll taxes at $250,000 (adjusted annually). To offset the resulting loss in payroll tax revenue, the bill directs the Treasury to compensate the Social Security trust funds. Starting in 2026, workers earning above $250,000 annually would have 2 percent of their excess earnings counted toward their future Social Security benefits, providing higher benefit calculations for higher-income earners while protecting low-income beneficiaries of programs like Supplemental Security Income, Medicaid, and CHIP from losing eligibility due to increased benefits. The changes apply to individuals who first become eligible for benefits after 2025 and represent a significant restructuring of how Social Security payroll taxes and benefits are calculated for higher earners.
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