The Social Security program provides some 74 million vulnerable Americans with a stable income each month and exists as a cornerstone of financial stability for many. The program is funded primarily through means of a dedicated payroll tax whereby 12.4% of a worker’s earnings are contributed towards Social Security payroll taxes. Generally speaking, the worker will contribute 6.2% and the employer will cover the remaining 6.2%, however, if the worker is self-employed, the full 12.4% will be covered by the worker.
There is, however, a limit on how much of your earnings are taxable and this limit is often referred to as a “wage base limit” or the “maximum taxable earnings”. For 2025, the limit is currently standing at $176,100. However, not only does this figure does tend to fluctuate from year to year, projections for the 2026 wage base also seem to indicate an increase and as a result, workers in higher income brackets will likely have to contribute a higher amount towards Social Security payroll taxes in the near future. Here is what you need to know.
Social Security payroll tax
Last year, a 4.4% increase to the tax limit for 2025 was announced and as result the limit was brought up from $168,600 to $176,100. This now meant that those earning higher incomes would be subject to a higher tax contribution. As such, in 2024, any income that exceeded $168,600 would not be taxed, however, in the current year of 2025, since this limit increased to $176,100, the worker would not have saved as much in taxes compared to 2024.
In essence, the higher your earnings are above the wage base limit, the more you save in Social Security payroll taxes. Here is an examples for comparison:
A salary exceeding limit by $10,000 = $186,100. Now assuming there is no base limit, your tax will amount to $11,538 (186,100 x 6.2%). However, with the base limit, you will only pay $10,918 in payroll taxes because $176,100 x 6.2% = $10,918.20. Subsequently, with the wage limit, you will save $620 on your taxes.
Alternatively, if your salary exceeds the limit by $30,000, you would save $1,860 in taxes. Both of these calculations do not take Medicare tax into account however and as such, the worker will still have to pay 1.45% in Medicare tax on their total earnings. This is because Medicare taxes do not have a wage base limit.
Furthermore, it is also worth noting that, “when you have more than one job in a year, each employer must withhold Social Security taxes from your wages. This applies no matter what other employers have already withheld. When this happens, the total Social Security taxes withheld could exceed the maximum limit. When you file your tax return the following year, you can claim a refund from the Internal Revenue Service for Social Security taxes withheld that exceeded the maximum amount,” according to the Social Security Administration (SSA).
Projected wage base limit for 2026
The wage base limit is raised each year in relation to how the national average wage index rises. From 2024 to 2025, there was a $7,500 increase which is quite substantial when considering the recent average increases. Over the most recent five year period, on average each year, the tax limit increased by $3,960. Going back a decade, from 2015 to 2016, the taxable earnings limit remained stagnant.
According to the latest report outlining the financial status of the program as published by the Social Security Board of Trustees, for 2026, the projected tax limit is $181,800.
Another figure that generally increases on a year over year basis is the Social Security benefit amount. This percentage increase is called the Cost of Living Adjustment, or COLA and it is implemented in order to combat the effects of inflation. For 2025, the COLA was announced at 2.5% meaning that all benefit amounts were increased by 2.5%. As such, “Social Security retirement monthly benefits for about 68 million people are expected to grow by more than $50 beginning January 2025” on average according to the SSA.