Is There a Limit to Social Security Tax?

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Once your earnings exceed a specific amount, you can stop paying into Social Security for the rest of the year.

If you’ve got a high salary, you may not need to pay Social Security tax on all of your earnings, according to the article “What is the Social Security Tax Limit?” from U.S. News & World Report. Wage earners pay into the Social Security system until their income reaches the Social Security tax limit for the year.

For 2023, the taxable maximum is $160,200. Once you hit that mark, earnings are not subject to Social Security tax nor factored into Social Security payments for retirement benefits.

Most workers pay 6.2% of their earnings into the Social Security system annually, and employers match this amount. If you’re self-employed, you contribute 12.4% of your income to Social Security. However, high-income earners only pay until they reach the maximum.

Once you reach the maximum level, withholdings from your employer end, resulting in an even healthier paycheck. In most companies, the payroll company or department tracks this maximum and ends the withholding.

Wage earners whose salaries exceed $160,200 or more in 2023 contribute $9,932.40 to Social Security, plus their employer contributes a matching amount. Self-employed people must contribute $19,864.80 to Social Security in 2023.

Both self-employed and wage earners should check to be sure the right amount of money is being paid to Social Security, usually by a CPA for the self-employed person and the payroll department for an employee.

The Social Security taxable minimum is adjusted annually to keep up with changes in average wages. In 2023, the tax limit is $13,200 more than the 2022 taxable maximum of $147,000 and $53,400 higher than the 2010 limit of $106,800. For a longer-term perspective, the taxable maximum in 2000 was just $76,200; in 1990, it was $51,300.

If you earn more than the taxable limit through multiple jobs, each employer must withhold Social Security taxes from your wages until you exceed the tax limit at each position. When you file your annual tax return, you can claim a refund for Social Security taxes held over the taxable limit amount for the year.

People who have multiple jobs or change jobs during a year run the risk of over-withholding, so be sure to claim a refund if too much has been withheld.

While there is a cap on earnings subject to the Social Security tax, there is no limit on the Medicare tax. All covered wages are subject to a 1.45% Medicare tax that employers match, plus there’s an additional 0.9% Medicare tax on wages exceeding $200,000 in a calendar year. Employers do not check this.

Reference: U.S. News & World Report (Jan. 17, 2023) “What is the Social Security Tax Limit?”