by Michael Cardman, Brightmine Senior Legal Editor
As the general rate of inflation continues to slow down, so too does the increase in the Social Security payroll tax wage cap.
The Social Security Administration (SSA) recently announced that the maximum earnings subject to the Social Security payroll tax will increase by 4.4% next year, from $168,600 to $176,100.
That’s a substantial increase — but noticeably smaller than the 9.0% increase in 2023 and the 5.2% increase in 2024.
The SSA also posted a fact sheet summarizing the 2025 cost-of-living adjustments (COLAs), which are based on the increase in average wages.
In 2025, there will continue to be no limit to the amount of wages subject to the Medicare tax rate of 1.45%. In addition, wages that exceed $200,000 ($250,000 for married couples filing jointly) will continue to be subject to the extra 0.9% Medicare tax, which is only paid by employees.
Employers and employees each contribute into the Social Security retirement system via Social Security and Medicare (FICA) taxes. The total FICA tax rate (6.2% for social security plus 1.45% for Medicare) will remain unchanged at 7.65% for 2025, up to the $176,100 social security taxable wage cap.
The maximum Social Security tax employees and employers will each pay in 2025 is $10,918.20, which is an increase of $465.00 (from $10,453.20 in 2024).
Employees whose compensation exceeds the current 2024 taxable earnings cap of $168,600 may notice an increase in their FICA withholding beginning next January due to the payroll tax adjustment, resulting in a slight decrease in their net take-home pay.
About the author
Michael Cardman
Senior Legal Editor, Brightmine
Michael Cardman has more than 20 years of experience in publishing and has specialized in employment law for more than 15 years. As a member of the Brightmine editorial team, he focuses on wage and hour compliance, including minimum wage, overtime, employee classification, hours worked, independent contractors and child labor.
Michael holds a Bachelor of Arts degree in English from the University of Virginia. Prior to joining Brightmine, he was the managing editor for Thompson Publishing Group’s library of HR publications. In this role, he was responsible for overseeing books, manuals and online tools covering a variety of topics such as wage and hour, employee leaves, employee benefits and compensation.
Connect with Michael on LinkedIn.
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