With 2025 on the horizon, the Social Security wage base is rising. The Social Security Administration announced an increase to $176,100 for 2025, up from $168,600 in 2024. Earnings above this threshold won’t be subject to Social Security tax. Wages and self-employment income above this amount aren’t subject to Social Security tax.
If your business employs high earners, this change could mean higher payroll costs.
Social Security basics
The Federal Insurance Contributions Act (FICA) requires employers, employees, and self-employed individuals to pay two types of taxes: Social Security tax, specifically for Old Age, Survivors, and Disability Insurance, and Medicare tax for Hospital Insurance.
While Social Security tax applies only to income up to a set wage base, Medicare tax has no such cap. For 2025, the FICA tax rate for employers remains unchanged at 7.65%–with 6.2% for Social Security and 1.45% for Medicare.
Updates for 2025
In 2025, employees will pay:
- 6.2% Social Security tax on wages up to $176,100 (maximum tax of $10,918.20)
- 1.45% Medicare tax on wages up to $200,000 ($250,000 for joint filers, $125,000 for married filing separately)
- 2.35% Medicare tax on all wages above $200,000 ($250,000 for joint returns, $125,000 for married filing separately)
Self-employment workers will pay:
- 12.4% Social Security tax on the first $176,100 of income (maximum tax of $21,836.40)
- 2.9% Medicare tax on income up to $200,000 ($250,000 combined income for joint returns, $125,000 for married filing separately)
- 3.8% Medicare tax (2.9% + 0.9% additional tax) on income exceeding $200,000 ($250,000 combined income for joint returns, $125,000 for married filing separately)
History of the Social Security wage base
The Social Security payroll tax began in 1937 with a wage base of $3,000, which stayed unchanged until 1950.
As wages rose and the U.S. economy grew, adjustments were needed to ensure the Social Security system continued to collect enough revenue. By 1980, it had risen to $25,900.
Twenty years later it had increased to $76,200 and by 2020, it was $137,700. Inflation and wage growth have driven these changes over time, keeping the Social Security system sustainable.
Employees with multiple employers
Employees who work for more than one employer may have Social Security taxes withheld by both. Even if their combined wages exceed the annual wage base threshold, each employer is still required to withhold Social Security tax on the wages they pay.
Employees cannot request that an employer stop withholding once the threshold is met. However, any excess Social Security tax withheld across multiple jobs will be credited back to the employee when they file their tax return.
For guidance on payroll tax filing or payments for 2025, contact your Smolin advisor to stay compliant and on track.