As 2025 approaches, changes to the Social Security wage base are on the horizon. The Social Security Administration has announced an increase in the wage base for calculating Social Security tax, rising to $176,100 in 2025 (up from $168,600 in 2024). Income above this threshold will not be subject to Social Security tax, so businesses with high earners should plan for potential payroll cost adjustments.
Social Security and FICA Overview
Historically, the Social Security wage base has evolved significantly since its inception in 1937, when it was $3,000. By 1980, it had grown to $25,900, and by 2020, it reached $137,700. Adjustments reflect inflation and wage growth, ensuring the Social Security system remains financially sustainable.
Under the Federal Insurance Contributions Act (FICA), employers, employees, and self-employed individuals pay two taxes:
Social Security Tax
Medicare Tax
While Social Security tax has a maximum taxable wage base, there is no limit on wages subject to Medicare tax. In 2025, the FICA tax rate for employers remains unchanged at 7.65% — 6.2% for Social Security and 1.45% for Medicare.
2025 Tax Rates and Limits
For employees in 2025:
Social Security tax: 6.2% on wages up to $176,100 (maximum $10,918.20).
Medicare tax: 1.45% on wages up to $200,000 ($250,000 for joint filers, $125,000 for separate filers), and 2.35% on wages above those amounts.
For self-employed individuals in 2025:
Social Security tax: 12.4% on self-employment income up to $176,100 (maximum $21,836.40).
Medicare tax: 2.9% on income up to $200,000 ($250,000 for joint filers, $125,000 for separate filers), and 3.8% on income above those thresholds.
Employees with multiple employers will have Social Security tax withheld by each employer, even if their combined wages exceed the annual wage base. Employers cannot stop withholding based on the employee’s total income. However, employees can claim a credit on their tax return for any excess Social Security tax withheld.
Need Help?
Navigating payroll taxes can be complex, especially with changing thresholds. If you have questions about payroll tax filing or payments for 2025, contact us. We’ll help you remain compliant and prepared for the year ahead.