Will More of Your Paycheck Go to Social Security Taxes Next Year?
Some high earners will find they owe more Social Security tax next year thanks to changes in the wage base limit. Learn more here.
If you are working and earning income, you’re likely paying payroll taxes to fund Social Security. These taxes are charged differently from regular income tax. There is a dedicated Social Security payroll tax, with employers and employees each paying 6.2% of a worker’s wages.
Most people pay that 6.2% on all of the money they earn, but this is not true of everyone. Higher earners pay Social Security payroll taxes on just a portion of their income. However, in 2025, that portion is increasing, so many are going to end up owing more Social Security taxes in 2025 than they do in 2024.
Here’s why that’s the case, and why owing more Social Security payroll taxes isn’t necessarily a bad thing.
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Social Security’s wage base limit is increasing in 2025
To understand why some people will have to pay more Social Security payroll tax in 2025, you need to know what the wage base limit is.
The wage base limit caps the amount of wages that you pay Social Security payroll tax on. If you earn an income above the wage base limit, no money you make above that threshold is going to be taxed for Social Security.
In 2024, the wage base limit was $168,600. In 2025, it will increase to $176,100 for the year. This means anyone who earns income above $168,600 will find themselves facing a bigger tax bill in the new year.
Say, for example, that you earn $200,000 per year. In 2024, you’d have owed a 6.2% tax on all of your income up to $168,600, and anything above that wouldn’t have been subject to Social Security tax. In 2025, with the wage base limit going up to $176,100, you’re going to have to pay taxes on an additional $7,500 (the difference between $176,100 and $168,600).
At a rate of 6.2%, you’ll get stuck paying an extra $465, and your employer will have to do the same.
Why you shouldn’t be disappointed about paying more taxes on Social Security benefits
If you are a higher earner who will find yourself owing taxes on up to $7,500 more of your income in 2025, you may be disappointed to find that more of your money is disappearing from your checks.
The good news is that the extra wages that you’ll be taxed on in 2025 are also going to qualify you for bigger Social Security benefits later. That’s because your earnings record, which your benefits are based on, only counts income up to the wage base limit.
So in 2024, no matter how much you made, you only got credit for a maximum of $168,600 in earnings for your future benefits calculation. With the wage base limit increasing, you’ll get credit for an extra $7,500 in earnings in 2025, and your future benefits will be larger because of it.
If you earn above that $168,600 threshold, you should be prepared for more money to start coming out of your check next year. Plan and adjust your budget accordingly, so you’ll be ready when the new year arrives and the new wage base limit takes effect.
