“A bill to amend the Internal Revenue Code of 1986 to repeal the inclusion in gross income of social security benefits, and for other purposes.”
No CRS summary available for this bill.
This section repeals the requirement under IRC §86 to include Social Security and Tier I Railroad Retirement benefits in gross income (i.e., terminates taxation of those benefits) for taxable years beginning after the date of enactment. It also appropriates to each relevant trust fund under the Social Security Act (including the Federal Hospital Insurance Trust Fund) or Railroad Retirement Act of 1974, for each fiscal year, an amount equal to the reduction in transfers to that fund resulting from the repeal. (Thus, the trust funds are held harmless via general Treasury funds for revenue previously received from taxes on benefits.)
This section revises the definitions of wages for Social Security (OASDI) payroll taxes and benefits, railroad retirement taxes, and self-employment income for OASDI taxes after 2025. (As background, the contribution and benefit base caps annual earnings subject to the 12.4% OASDI payroll tax—6.2% each on employees and employers—and creditable for retirement benefits at $168,600 in 2024.) It repeals prior wage cap exclusions under IRC §3121(a)(1) and SSA §209(a)(1); for years when the base is less than $250,000, excludes from wages remuneration between the base and $250,000 (per employer, aggregating related employers and successors) but includes remuneration exceeding $250,000, applies parallel rules to railroad retirement compensation under IRC §3231(e), and limits the SSA wage exclusion accordingly; and caps self-employment income subject to OASDI tax at earnings up to the base (reduced by wages up to the base) plus total compensation exceeding the greater of $250,000 or wages paid. (Thus, earnings between the base and $250,000 are exempt from OASDI taxes, while earnings above $250,000 are subject to them.)
This section revises the primary insurance amount (PIA) formula to include, for individuals who initially become eligible for old-age or disability benefits after 2025 (or die before becoming eligible), an additional amount equal to 2% of excess average indexed monthly earnings from wages and self-employment income after 2025 exceeding the higher of $250,000 or the contribution and benefit base for the year. (As background, the PIA determines Social Security benefit amounts for retired or disabled workers and their families and is currently based on average indexed monthly earnings (AIME) only up to the annual contribution and benefit base, or approximately $168,600 in 2024.) The section makes conforming changes by (1) adjusting an applicable percentage in the family maximum benefit computation from 85% of AIME to the sum of 85% of regular AIME and 1% of excess AIME; (2) inserting references to excess AIME in the coverage of employees of states and political subdivisions; and (3) limiting indexing of certain historical earnings to periods before 2026. For purposes of determining eligibility for and benefit amounts under SSI, Medicaid, or CHIP, the section deems title II benefits not to exceed amounts payable under the law in effect immediately before enactment.