HR7361-119

What This Bill Does

This bill amends the Internal Revenue Code definition of taxable Social Security benefits so certain payments attributable to the Social Security Fairness Act of 2023 are not counted as Social Security benefits for federal gross-income purposes. The exclusion applies to payments tied to months beginning after December 31, 2024, and before January 1, 2026, which targets the transition period for restored benefits.

Who Benefits and How

Retirees and beneficiaries who receive restored Social Security payments because of the Social Security Fairness Act benefit from lower taxable income on those transition payments. Public pension retirees affected by the windfall elimination provision or government pension offset benefit when retroactive or restored Social Security amounts are shielded from federal income taxation for covered months.

Who Bears the Burden and How

The IRS must administer a temporary exclusion and update tax forms, guidance, and taxpayer assistance for restored-benefit payments. The Social Security Administration may need to identify or report qualifying payments so beneficiaries and the IRS can apply the exclusion correctly. Federal taxpayers bear the revenue loss from excluding covered payments from gross income.

Key Provisions

• Amends the Internal Revenue Code so covered restored Social Security payments are excluded from the taxable Social Security benefit definition.
• Limits the exclusion to payments attributable to Social Security Fairness Act amendments for months after December 31, 2024, and before January 1, 2026.
• Provides tax relief to beneficiaries receiving restored Social Security amounts during the transition period.