Will More of Your Paycheck Go to Social Security Taxes Next Year?
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.
Image source: Getty Images.
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.The $22,924 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.
View the "Social Security secrets" »The Motley Fool has a disclosure policy.
Welcome to Billionaire Club Co LLC, your gateway to a brand-new social media experience! Sign up today and dive into over 10,000 fresh daily articles and videos curated just for your enjoyment. Enjoy the ad free experience, unlimited content interactions, and get that coveted blue check verification—all for just $1 a month!
Account Frozen
Your account is frozen. You can still view content but cannot interact with it.
Please go to your settings to update your account status.
Open Profile Settings