How the Social Security payroll tax limit for 2025 may affect you

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How the Social Security payroll tax limit for 2025 may affect you

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How the Social Security tax calculation works

The Social Security payroll tax rate is 12.4%, with workers paying 6.2% through paycheck deductions. Employers pay the other 6.2%.

For 2025, workers will pay 6.2% on earnings up to $176,100, for a

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, according to the Social Security Administration. Once workers reach that max, they don’t pay into the program for the rest of the year.

The 2025 adjustment has a ******* impact on self-employed workers because “they’re paying both sides of it,” meaning they owe the full 12.4%, according to Lovison, who is also a certified public accountant.

The government also collects 2.9% in Medicare payroll taxes, with workers and employers each paying 1.45%. But there is no cap on taxable earnings for Medicare.

Self-employed workers are also responsible for both sides of the Medicare tax, for a combined 15.3% between Social Security and Medicare. However, they can deduct 50% of self-employment taxes on their individual return, even if they don’t itemize.

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Concerns over Social Security solvency 

The latest Social Security adjustments come amid growing concerns about the

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In the meantime, some advocates have pushed to

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to provide more funding.

The Social Security Administration’s 2024 trustees’ report details more than 150 options to

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, including ways to cut benefits and boost revenue.

“Clearly, the biggest financial gain comes from eliminating the taxable maximum,” Alicia Munnell, director of the Center for Retirement Research at Boston College

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in August.

However, future changes are unclear with control over Congress and the White House uncertain.

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