What Is the Social Security Tax Limit?

What Is the Social Security Tax Limit?

What Is the Social Security Tax Limit?

You can stop contributing to Social Security for the remainder of the year once your earnings reach a certain threshold.

If you make a high salary, you might not be required to pay Social Security tax on all of your income. Up until the income cap for Social Security taxes in a given year, workers contribute to the Social Security system. The maximum Social Security taxable benefit in 2023 is $160,200. Earnings beyond this threshold are not taxed by Social Security or included in retirement Social Security benefits.

What Is the Social Security Tax Limit?

The maximum amount of wages due to Social Security tax is known as the Social Security tax limit. In 2023, the highest Social Security taxable benefit is $160,200. Employees must pay a 6.2% Social Security tax on their wages up to $160,200 in annual earnings.

When Do You Stop Paying Into Social Security?

The average worker contributes 6.2% of their annual income to the Social Security system, and employers match this contribution. 12.4% of self-employed workers' salaries go into Social Security. High earners, however, only contribute to the Social Security system up until their earnings exceed the $160,200 Social Security taxable threshold in 2023.

Social Security does not include tax or factor earnings above $160,200 into current or future benefits. According to Mike Biggica, a certified financial planner and the owner of Pixel Financial Planning in San Francisco, "after you reach the maximum taxable earnings, withholdings from your employer will end, resulting in a bigger paycheck." The payroll department of your business keeps track of this maximum and will stop deducting money for Social Security.

What Is the Maximum Amount of Social Security Tax?

When a person earns $160,200 or more in 2023, he or she pays $9,932.40 into Social Security, and their employer also makes a matching contribution. Self-employed people who make more than the taxable maximum in 2023 are required to make a $19,864.80 Social Security contribution.


The founder of Clark Asset Management in Andover, Massachusetts, and certified financial planner Bradley Clark advises making sure the right amount is withheld at the end of the year. "Be careful not to overpay, whether due to an employer mistake or working numerous jobs."

How Has the Social Security Tax Limit Changed Over Time?

Each year, the Social Security taxable maximum is changed to reflect changes in the national median pay. The tax cap for 2023 is $13,200 higher than the $147,000 taxable cap for 2022 and $53,400 higher than the $106,800 cap for 2010. In 2000, it was just $76,200, while in 1990, it was $51,300.

What Happens When Your Earnings Exceed the Taxable Maximum?

Your paychecks will increase once your earnings at a particular employment reach the taxable maximum for that year, at which point Social Security taxes will no longer be deducted. The net amount of your payment just grows once you reach the cap, according to Clark. "Social Security tax is no longer subtracted."

If you work numerous jobs and make more than the maximum taxable amount, each of your employers is required to deduct Social Security taxes from your pay until you reach the maximum taxable amount for that specific employer. However, if more Social Security taxes than allowed for that year were withheld, you can request a refund when you complete your tax return.

According to Ken Cornutt, a licensed financial advisor and the owner of Westside Financial in Los Angeles, "there is a possibility for over-withholding of Social Security if you have many employers or change employment during the year." If too much has been withheld throughout the course of the year, you can request a refund from the IRS.

Is There a Medicare Tax Limit?

The Social Security tax is capped at a certain amount of wages, but the Medicare tax has no such cap. An employer-matched Medicare levy of 1.45% is applied to all covered wages. Additionally, a 0.9% Medicare tax that is not matched by employers is levied on wages over $200,000 in a given year.

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