S. 2716: You Earned It, You Keep It Act

The "You Earned It, You Keep It Act" proposes amendments to the Internal Revenue Code designed to impact the handling of Social Security benefits and self-employment income. Key elements of the bill are outlined below:

Repeal of Inclusion of Social Security Benefits in Gross Income

The bill aims to repeal the current requirement that Social Security benefits be included in an individual's gross income for tax purposes. This means that starting after the bill is enacted, individuals would not have to pay taxes on their Social Security benefits, making more of those funds available to them.

Protection for Social Security Trust Funds

To address any potential financial impact of the repeal, the bill includes a provision that ensures Social Security trust funds are financially supported. Specifically, appropriations will be made annually to each Social Security and Railroad Retirement fund to compensate for any loss in revenue due to the repeal of the income inclusion of Social Security benefits.

Adjustments for Wages and Self-Employment Income

The bill proposes changes regarding how wages and self-employment income are calculated for tax purposes. Some of the main adjustments include:

• New Threshold for Wage Exclusions: For any calendar year where the contribution and benefit base is below $250,000, wages paid in excess of this amount would not be subject to taxation under certain conditions.
• Self-Employment Income Adjustments: The bill defines “self-employment income” and adjusts how it is calculated, ensuring that only income above $250,000 would be taxed more extensively.
• Multiple Employers Taxation: A special rule would be introduced for employees who receive wages from multiple employers, applying a tax that would be equivalent to what would have been imposed if the income had come from a single employer.

Changes to the Social Security Benefit Formula

The bill amends the Social Security benefit formula, allowing for the inclusion of earnings over $250,000 when determining benefits. This means those with higher earnings could potentially see an increase in their Social Security payments based on this newly defined "excess average indexed monthly earnings" framework.

Ensuring No Negative Impact on SSI, Medicaid, and CHIP Beneficiaries

For individuals receiving Supplemental Security Income (SSI), Medicaid, or Children's Health Insurance Program (CHIP) benefits, the bill ensures that the new provisions will not adversely affect their eligibility or the amount of benefits they receive.

Effective Dates

The amendments formulated by this bill would apply starting in calendar years after 2025, with specific provisions for how changes to self-employment income are enacted after the end of that year.

Relevant Companies

None found.