Are there proposed or enacted legislative changes in 2025-2026 that alter Social Security taxation rules?
Executive summary
Congress and the White House enacted a 2025 package—the One Big Beautiful Bill (OBBB)—that does not repeal federal income taxation of Social Security benefits but creates a temporary, enhanced senior deduction (up to $6,000 per person for ages 65+) for tax years 2025–2028 that will reduce taxable income and, for many, eliminate federal income tax on their benefits (administration and IRS materials describe the deduction and its effect) [1] [2] [3]. Separately, several 2025–2026 bills and proposals in Congress would change how Social Security is taxed or funded — including S.770/H.R.1700 “Social Security Expansion Act” measures and H.R.904 to exclude benefits from gross income — but those remain legislative proposals, not law [4] [5] [6].
1. The law passed in 2025: a big deduction for seniors, not a direct repeal
Presidentially backed OBBB signed July 4, 2025, created a temporary enhanced standard deduction of $6,000 for taxpayers age 65 and older for tax years 2025–2028; the IRS and SSA fact sheets state the deduction is in addition to existing senior standard-deduction amounts and will affect how much Social Security benefits are taxable by reducing taxable income [1] [2] [7].
2. Why headlines said “no tax on Social Security” — and why that’s misleading
The White House and SSA communications highlighted that the deduction will mean “the vast majority” (88% cited by the White House) of beneficiaries will pay no federal income tax on their benefits, because the deduction can fully offset taxable benefit amounts for many retirees; but multiple reporters and tax analysts stress the change works indirectly as an income deduction rather than an amendment to the statute that defines Social Security as includible in gross income [3] [8] [9].
3. Practical effect in 2025–2028: who wins, who doesn’t
The deduction phases out by income and has eligibility thresholds (full deduction up to $75,000 single / $150,000 married, with higher phaseouts and cutoffs noted in IRS and policy summaries). Agencies and mainstream outlets say the provision will eliminate federal income tax on benefits for many lower- and middle-income retirees but will not remove taxes for higher‑income beneficiaries; exact impact depends on filing status and other income sources [1] [10] [11].
4. What OBBB did not change: payroll taxes and benefit taxation rules remain
OBBB did not change payroll‑tax rules (Social Security OASDI payroll tax remains 6.2% on wages up to the taxable maximum) nor did it rewrite the statutory formulas that determine how much of benefits are included in gross income; those structures and the payroll tax base remain under SSA and IRS authority and are unchanged in the law’s text described by agency materials [12] [13] [14].
5. Active legislative proposals in 2025–2026: more ambitious changes on the table
Separate from OBBB, lawmakers have introduced bills that would more directly change taxation of benefits or expand payroll taxation to fund benefit increases. Examples in congressional records include the Social Security Expansion Act (S.770 / H.R.1700), which the press and bill summaries say would increase benefits and expand payroll tax bases (applying payroll taxes above current caps), and H.R.904, which would exclude Social Security benefits from gross income — but these remain proposals in the 119th Congress, not enacted law [4] [5] [15] [6].
6. Budget rules and path dependency constrain sweeping tax rewrites
Observers and fact sheets note that major statutory changes to Social Security (for example, permanently excluding benefits from taxable income) face budget rules and political barriers; OBBB’s senior deduction was framed as a tax relief work‑around that avoided direct alteration of Social Security’s statutory tax treatment, and reconciliation rules reportedly barred direct changes to Social Security in that process [9] [2] [8].
7. What to watch in 2026: COLA, payroll‑tax caps, and follow-on bills
Even without further immediate statutory change to benefit taxation, automatic adjustments and proposals will affect taxpayers: the Social Security taxable maximum rose for 2026 (announced by SSA), the 2026 COLA changes incomes used in tax thresholds, and proposed bills would expand payroll‑taxable earnings above existing caps — all of which could shift who pays payroll taxes and how benefits interact with taxable income in future years [13] [16] [15].
Limitations and open items: available sources document the enacted OBBB senior deduction and list pending congressional bills; available sources do not mention final Congressional action in 2026 that would enact the proposed S.770/H.R.1700/H.R.904 changes into law [4] [5] [6].