(a) In general

Section 86 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

(g) Special rules for taxable years 2026 and 2027

(1) In general

In the case of a taxable year beginning after December 31, 2025, and before January 1, 2028, this section shall be applied as provided in paragraphs (2) and (3).

(2) Separate application for retirement and disability benefits

Subsection (a) shall be applied separately with respect to—

(A)

any social security benefits received by the taxpayer by reason of entitlement to—

(i)

a monthly benefit under section 202 of the Social Security Act (42 U.S.C. 402), or

(ii)

a tier 1 railroad retirement benefit, and

(B)

any social security benefits received by the taxpayer by reason of entitlement to a monthly benefit under section 223 of the Social Security Act (42 U.S.C. 423).

(3) Reduction of inclusion in gross income for old-age and survivors insurance benefit payments

For purposes of any social security benefits which are described in paragraph (2)(A), in lieu of the amount determined under subsection (a) (after the application of paragraph (2)) with respect to such benefits, the amount of such benefits which are included in the gross income of the taxpayer under this section shall be equal to—

(A)

the amount otherwise determined under subsection (a) (after the application of paragraph (2)) with respect to such benefits, minus

(B)

an amount equal to—

(i)

in the case of a taxable year beginning after December 31, 2025, and before January 1, 2027, 10 percent of the amount determined under subparagraph (A), and

(ii)

In the case of a taxable year beginning after December 31, 2026, and before January 1, 2028, 20 percent of the amount determined under subparagraph (A).

(b) Protection of trust funds

There are hereby appropriated to the Federal Old-Age and Survivors Trust Fund and the Federal Disability Insurance Trust Fund established under section 201 of the Social Security Act (42 U.S.C. 401), as well as the Medicare Hospital Insurance Trust Fund established under section 1817(a) of the Social Security Act (42 U.S.C. 1395i(a)), amounts equal to the reduction in revenues to the Treasury by reason of the amendment made by subsection (a). Amounts appropriated by the preceding sentence shall be transferred from the general fund at such times and in such manner as to replicate to the extent possible the transfers which would have occurred to each such Trust Fund had such amendment not been enacted.

(c) Effective date

The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 2025.