Sponsors (21)
The bill provides targeted, inflation-protected tax relief to middle- and lower-income households and families while raising revenue from a new high-income surcharge, but it reduces overall revenue, increases compliance and administrative complexity, and may create adverse effects for seniors and investment.
Middle- and lower-income households (including families and single parents) will face a cap of 25.5% on tax applied to MAGI above the cost-of-living exemption, with larger exemption amounts for joint filers and heads of household and the exemption indexed to CPI‑U, preserving the real value of relief over time.
A new surcharge on high-income individuals will raise federal revenue that Congress could use to fund services or reduce deficits, shifting more of the tax burden to wealthy taxpayers.
The statute specifies an effective date (taxable years beginning in 2026), giving taxpayers and tax professionals time to plan for the surcharge and exemption changes.
The exemption and the 25.5% rate cap will reduce federal income tax revenue, which could increase deficits or require offsets such as spending cuts or other tax increases.
The new rules (MAGI definition changes, indexing mechanics) together with the surcharge add filing complexity and create additional compliance and administrative burden and costs for taxpayers and the IRS.
Altering how excluded portions of Social Security are treated in modified AGI could increase taxable income for some seniors or change eligibility for certain caps, reducing net benefits for retirees.
Based on analysis of 6 sections of legislative text.
Caps individual income tax for eligible taxpayers at 25.5% of MAGI minus a cost-of-living exemption and adds a new surcharge part for high-income individuals, effective after 2025.
Creates a new alternative maximum tax rule that limits federal income tax for many lower- and middle-income filers to 25.5% of their modified adjusted gross income (MAGI) minus a cost-of-living exemption, and separately adds a new statutory part to impose a surcharge on high-income individuals (text of the surcharge not included). The changes apply to taxable years beginning after December 31, 2025, and redefine the eligibility, the MAGI definition, and how the cost-of-living exemption is calculated.
Official title: Amend the Internal Revenue Code of 1986 to make certain modifications in relation to the taxation of income required to fund basic living expenses, and for other purposes.
Introduced March 12, 2026 by Christopher Van Hollen · Last progress March 12, 2026