2024 Social Security Tax Cap: What You Should Know{2024}

Updated on April 6, 2024

The government puts a cap on the income subject to Social Security tax, and for 2024, it’s set at $168,600—an increase from $160,200 in 2023. In 2024, the maximum Social Security tax deducted from an employee’s paycheck is $10,453.20, up from $9,932.40 in 2023.

Until 2023, U.S. employees contributed 6.2% of their income up to $160,200. Employers matched this, resulting in a total 12.4% deduction for each employee. Self-employed individuals paid the full 12.4% but could deduct half from their taxes. The Social Security wage base (SSWB) limit, the maximum income subject to this tax, rises yearly. Starting at $9,000 in 1972, it has increased steadily over the years. Stay informed about the Social Security Tax Limit for 2024 to understand its impact on your income.

Understanding the Social Security Tax Cap

If your income surpasses the Social Security wage base, it won’t be subject to Social Security tax. The cap rises to $160,200 in 2023 from $147,000 in 2022, setting the maximum Social Security tax payment for 2023 at $9,932. Keep in mind, this cap applies specifically to the 6.2% Old-Age, Survivors, and Disability Insurance (OASDI) tax, or Social Security. Another payroll tax to be aware of is the 1.45% Medicare tax on your total income, which increases to 2.35% for income exceeding $200,000. Stay informed about these tax nuances to manage your finances effectively.

2024 Social Security Tax Limit

Recent updates from the Social Security Administration indicate that the income threshold for calculating Social Security taxes is set to increase from $160,200 in 2023 to $168,600 in 2024. Beyond this threshold, both self-employment income and wages are not subject to Social Security tax.

Under the Federal Insurance Contributions Act, employers, employees, and self-employed individuals face two taxes: one for Old Age, Survivors, and Disability Insurance (commonly known as Social Security tax) and another for Hospital Insurance (commonly known as Medicare tax). While Medicare tax has no upper limit, there is a cap on the amount subject to reimbursement for Social Security tax. In 2024, the FICA tax rate for employers will be 7.65%, with 1.45% allocated to Medicare and 6.2% to Social Security. Stay informed about these changes to understand their impact on your income.

2024 USA Social Security Tax Limit Information

Article TitleSocial Security Tax Limit 2024
Name of DepartmentInternal Revenue Service (IRS)
Social Security Tax Limit for 2023USD 160,200
IRS Social Security Tax Rate6.2%
CategoryFinance News
Social Security Tax Limit for 2024USD 168,600
Official Websiteirs.gov

Social Security 2024 COLA Increase

In October of this year, the Social Security Administration (SSA) announced a Cost of Living Adjustment (COLA) increase, aligning with the wage tax base rate. As per the update, the government is set to raise the monthly payments for nearly 65 million retirees receiving Social Security benefits by 3.2% in 2019. The SSA anticipates that, beginning in January 2024, Social Security retirement benefits will see an average increase of over $50 per month. Stay informed about these changes to understand their impact on retirees’ income.

2024 Social Security Tax Limit News

In 2024, employees will see the following deductions:

  • 6.2% Social Security tax on the first $168,600 of wages.
  • 1.45% Medicare tax on the initial $200,000 of wages.
  • For wages exceeding $200,000, there is a 2.35% Medicare tax.

For self-employed individuals in 2024:

  • A 12.4% Social Security tax on the first $168,600 of self-employment income, with a maximum tax of $20,906.40.
  • 2.90% Medicare tax on the first $200,000 of self-employment income, plus an additional 3.8% on all income above $200,000 (2.90% standard Medicare tax and 0.9% additional Medicare tax), applicable when self-employment income reaches $250,000 on a joint return or $125,000 for married individuals filing separately. Stay informed about these tax details for effective financial planning.

Evolution of Social Security Tax Limits

Since 1990, employees have consistently contributed 6.2% of their income to Social Security taxes, and this tax rate remains unchanged annually. Over the past decade, the federal government has raised the Social Security tax cap in eight out of ten years. The most substantial increase took place in 2023, soaring from $147,000 in 2022 to $160,200 in 2023—an almost 9% surge. Stay aware of these trends for a better understanding of Social Security tax dynamics.

Understanding Social Security Payroll Tax

The primary component of payroll taxes, known as the Federal Insurance Contributions Act (FICA) taxes, serves as the primary funding source for Social Security. Both employers and employees contribute 7.65% of their salaries to FICA taxes, with the 6.25% Social Security tax applicable only up to a specified annual income limit.

Self-employed individuals also contribute to these funds through taxes under the Self-Employment Contributions Act (SECA). The key difference lies in the rates, as individuals are responsible for both the employer and employee tax under SECA.

 

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