A new bill would eliminate Social Security taxation

Social Security taxes: Current law

Beginning in 2023, Social Security benefits will normally be taxed.

To determine whether you will owe taxes on your Social Security, you must first determine your combined income using the calculation below.

Total Income = AGI plus nontaxable interest plus one-half of Social Security benefits

If this amount exceeds $25,000, you must pay tax if you are a single filer, head of household, or eligible widow or widower with a qualifying dependent child.

The maximum for married couples filing jointly is $32,000. The amount of your Social Security payment that is subject to taxes depends on your overall income, with a ceiling of 85 percent.

New proposal on Social Security taxes

However, a plan presently circulating on Capitol Hill would prohibit the federal government from deducting funds from Social Security payouts.

You Earned It, You Keep It Act is the name of the legislation proposed by Angie Craig (D-Minnesota).

Craig proposes increasing the threshold on Social Security payroll taxes from $147,000 to $250,000 to make up for lost income.

The Implications For You

First, it does not signify anything yet; the legislation is still only a proposal, and it must through a lengthy process before it might become law. 

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