The "RETIREES FIRST Act" adjusts the income thresholds for taxing Social Security benefits to $34,000 for individuals and $68,000 for joint returns, indexed for inflation after 2025, while offsetting any revenue losses to Social Security and Railroad Retirement funds with equivalent appropriations and reallocating funds from non-security discretionary programs.
Nicole Malliotakis
Representative
NY-11
The "RETIREES FIRST Act" adjusts the tax rules for Social Security benefits by raising the income thresholds to $34,000 for individuals and $68,000 for joint returns, with annual inflation adjustments starting in 2026. It mandates that any resulting reduction in Social Security or Railroad Retirement funds be offset by an equivalent appropriation. To fund this tax relief for retirees, the bill rescinds funds from non-security related programs, with the Office of Management and Budget providing annual reports on these rescissions. These changes will take effect for the taxable years beginning after December 31, 2025.
RETIREES FIRST Act Proposes Higher Social Security Tax Thresholds After 2025, Funded by Cuts to Non-Security Programs
This bill, titled the "RETIREES FIRST Act," aims to change how Social Security benefits are taxed by increasing the income levels at which taxes kick in. Specifically, starting for tax years after December 31, 2025, the bill sets the base income thresholds to $34,000 for individuals and $68,000 for joint filers before Social Security benefits are included in taxable income. The core idea is to reduce the tax burden on retirees receiving these benefits.
More Breathing Room on Tax Day?
The main change here is bumping up those income thresholds. Right now, more retirees find their Social Security benefits taxed as their other income sources rise. This bill lifts that threshold significantly. For example, a single retiree earning $35,000 from pensions or part-time work might see less of their Social Security benefit taxed under this proposal compared to current rules. The bill also includes an inflation adjustment for these thresholds starting after 2025, rounding to the nearest $1,000 each year, aiming to keep pace with the cost of living. Importantly, Section 2 ensures that any resulting decrease in money going into the Social Security or Railroad Retirement funds will be covered by direct government appropriations, so the trust funds themselves aren't directly depleted by this tax change.
Where the Money Comes From: The Trade-Off
Paying for this tax relief involves cuts elsewhere. Section 3 outlines a plan to rescind, or take back, funds previously allocated to various "non-security related programs" starting in fiscal year 2027. The cuts would be applied proportionally (pro rata) across these programs based on the total cost of the retiree tax relief for that year. What counts as "non-security related" isn't explicitly defined in this section, leaving room for interpretation later. These cuts apply to funds provided through regular annual government funding bills. To keep track, the Office of Management and Budget (OMB) Director would need to publish annual reports starting by January 1, 2028, detailing exactly where the money was rescinded from.
The Real-World Ripple Effect
So, what does this mean practically? Some retirees, particularly those with moderate incomes just above the current tax thresholds, could see a welcome reduction in their federal income tax bill starting in 2026. However, the funding mechanism introduces uncertainty. Reducing funds from unspecified "non-security" programs could impact a wide range of government services – anything from environmental protection to education grants or scientific research could potentially see budget reductions down the line. The effectiveness of the inflation adjustment will also be key; if it doesn't keep up with real cost increases, the benefit of the higher thresholds could erode over time. The delayed start date means these changes wouldn't affect tax returns for a couple of years, and the impact of the funding cuts would begin even later.