In 2025, significant adjustments to Social Security taxes will impact both workers and employers. These changes, designed to align with national wage trends, include an increase in the maximum taxable earnings and modifications to the cost-of-living adjustment (COLA).
Increase in Maximum Taxable Earnings
The maximum amount of earnings subject to Social Security tax will rise from $168,600 in 2024 to $176,100 in 2025.
This means that income up to $176,100 will be taxed for Social Security purposes, while earnings above this threshold will not be subject to the Social Security tax.
| Year | Maximum Taxable Earnings |
|---|---|
| 2015 | $118,500 |
| 2016 | $118,500 |
| 2017 | $127,200 |
| 2018 | $128,400 |
| 2019 | $132,900 |
| 2020 | $137,700 |
| 2021 | $142,800 |
| 2022 | $147,000 |
| 2023 | $160,200 |
| 2024 | $168,600 |
| 2025 | $176,100 |
Social Security Tax Rates
The Social Security tax rate remains unchanged at 12.4%, split equally between employees and employers, with each contributing 6.2%. Self-employed individuals are responsible for the full 12.4% tax. These rates have been consistent since 1990.
Cost-of-Living Adjustment (COLA) for 2025
Beneficiaries will receive a 2.5% COLA in 2025, resulting in an average monthly benefit increase of approximately $49, raising the average payment from $1,927 to $1,976. This adjustment reflects changes in the Consumer Price Index and aims to help beneficiaries maintain their purchasing power amid inflation.
Impact on Workers with Multiple Jobs
For individuals with multiple employers, each employer is required to withhold Social Security taxes up to the wage base limit. This could result in excess withholding if combined earnings exceed the maximum taxable amount.
In such cases, individuals can claim a refund for the overpaid Social Security taxes when filing their federal income tax returns.
Earnings Limits for Social Security Beneficiaries
In 2025, the earnings limit for individuals under full retirement age is $23,400. Earnings above this limit will result in a $1 reduction in benefits for every $2 earned over the threshold.
For those reaching full retirement age in 2025, the limit is $62,160, with a $1 reduction for every $3 earned over this amount until the month they reach full retirement age. There is no earnings limit for individuals who have reached full retirement age for the entire year.
Planning Ahead
These changes underscore the importance of staying informed about Social Security regulations, as they directly affect retirement planning and current earnings.
Workers and beneficiaries should review their financial plans to accommodate these adjustments and ensure compliance with tax obligations.
What is the new maximum taxable earnings amount for Social Security in 2025?
The maximum taxable earnings for Social Security in 2025 is $176,100.
Has the Social Security tax rate changed for 2025?
No, the Social Security tax rate remains at 12.4%, split equally between employees and employers.
How does the 2025 COLA affect Social Security benefits?
The 2.5% COLA will increase the average monthly benefit by approximately $49, bringing it to $1,976.
