The "RETIREES FIRST Act" adjusts the income thresholds at which Social Security benefits become taxable, setting them at \$34,000 for individuals and \$68,000 for joint returns, and adjusts for inflation after 2025, while ensuring no negative impact on Social Security and Railroad Retirement funds. To offset the cost of retiree tax relief, the bill rescinds funds from non-security discretionary appropriations, starting in fiscal year 2027.
Marsha Blackburn
Senator
TN
The "RETIREES FIRST Act" adjusts the income thresholds at which Social Security benefits become taxable, raising them to \$34,000 for individuals and \$68,000 for joint returns, and adjusts for inflation after 2025. It ensures no negative impact on Social Security and Railroad Retirement funds by allocating funds to cover any reduction in transfers to these funds. The bill reallocates non-security discretionary appropriations to cover the cost of retiree tax relief, with the Office of Management and Budget required to publish annual reports detailing rescissions. These changes would apply to tax years beginning after December 31, 2025.
RETIREES FIRST Act: Social Security Tax Break Proposed, Paid For By Cutting Other Government Programs
The "RETIREES FIRST Act" aims to give some retirees a tax break on their Social Security benefits, starting in 2026. The bill increases the income threshold at which those benefits become taxable. Currently, the threshold for when some of your Social Security benefits can be taxed is relatively low. This bill changes that.
Social Security Tax Changes: Who Could Benefit?
Under this proposed law, if you're single and your income is less than $34,000, none of your Social Security benefits will be taxed (SEC. 2). If you're married and filing jointly, that threshold jumps to $68,000. These thresholds will also be adjusted for inflation after 2025, meaning they'll likely increase over time (SEC. 2). This could mean more money in the pockets of retirees who fall within these income brackets. For example, a retired teacher with a modest pension and Social Security income might see their tax bill go down, giving them a little extra breathing room.
However, there's a catch for married folks filing separately. If you live with your spouse at any point during the year, your threshold is zero (SEC. 2). This means that any amount of social security that you receive will be taxable.
Funding the Tax Break: Cuts Elsewhere
So, how does the government plan to pay for this tax break? The bill proposes cutting funds from "non-security discretionary appropriations" starting in fiscal year 2027 (SEC. 3). Essentially, they're going to take money from other government programs – excluding defense and security-related spending – to offset the cost of the tax cut for retirees. The cuts will be applied proportionally across all non-security programs funded by annual appropriation acts (SEC. 3). The law also includes a requirement to ensure that the Social Security and Railroad Retirement funds do not lose money as a result of the proposed changes in taxation (SEC. 2).
What does this mean in practice? It's a bit of a budget shuffle. While some retirees will see a tax reduction, other government programs could face budget cuts. The exact programs affected will depend on how the Office of Management and Budget (OMB) decides to implement these cuts. Think of it like this: if you get a bonus at work but your company reduces overtime hours to compensate, the overall budget stays the same, but some areas get more resources while others get less. The OMB will publish a yearly report, starting January 1, 2028, detailing where these cuts are made (SEC. 3). This is important because, while the intention might be to streamline government spending, there's a risk that essential services or programs could be impacted.