Employers: Social Security Wage Base Increase in 2025
Posted by on October 21, 2024
The Social Security Administration has announced that the wage base for Social Security tax will increase to $176,100 in 2025, up from $168,600 in 2024. This means wages and self-employment income above $176,100 will not be subject to Social Security tax. Employers with high-earning employees should anticipate increased payroll costs and budget accordingly.
Social Security and Medicare Basics
The Federal Insurance Contributions Act (FICA) taxes employers, employees, and self-employed workers for Social Security and Medicare. For 2025, the FICA tax rate remains at 7.65%, with 6.2% for Social Security (capped at the new wage base) and 1.45% for Medicare, which has no maximum limit.
2025 Tax Details for Employees and Self-Employed Individuals
For employees in 2025:
- Social Security tax is 6.2% on the first $176,100 of wages, with a maximum tax of $10,918.20.
- Medicare tax is 1.45% on wages up to $200,000 for individuals ($250,000 for joint returns), with an additional 0.9% Medicare tax on wages above those limits.
For self-employed individuals:
- Social Security tax is 12.4% on the first $176,100 of income, with a maximum tax of $21,836.40.
- Medicare tax is 2.9% on the first $200,000 ($250,000 on a joint return) and 3.8% on income above those limits.
History and Considerations for Multi-Employer Workers
The Social Security wage base has increased steadily since its introduction in 1937 to keep up with inflation and wage growth. Employees with multiple employers cannot stop Social Security withholding once they reach the wage base threshold; each employer must continue to withhold, but the employees will receive a credit for any excess on their tax returns.
If you have questions about payroll tax compliance or filing for 2025, reach out to us for assistance. We’re here to help you navigate these changes smoothly.
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Jeremy joined Lumsden & McCormick Financial Services in 2023 as a financial advisor. He has sixteen years of professional experience in the financial advising industry. Jeremy has his Series 7, Series 66, Life Insurance, Health Insurance, and Long-Term Care licenses. He specializes in financial planning, wealth management, tax planning, and insurance planning.