As 2025 approaches, there are important changes to the Social Security wage base. The Social Security Administration recently announced that the wage base for calculating Social Security tax 
will increase to $176,100 for 2025, up from $168,600 in 2024. Earnings and self-employment income beyond this limit will not be subject to Social Security tax.
If your business has employees, especially higher earners, it’s important to prepare for potential increases in payroll costs.
Social Security Basics
The Federal Insurance Contributions Act (FICA) requires two types of taxes: the Social Security tax (Old Age, Survivors, and Disability Insurance) and the Medicare tax (Hospital Insurance). While there’s a cap on the earnings subject to Social Security tax, Medicare tax applies to all wages without any upper limit. In 2025, the FICA tax rate for employers will remain the same as 2024 at 7.65% — 6.2% for Social Security and 1.45% for Medicare.
2025 Updates
In 2025, employees will contribute:
- 6.2% Social Security tax on the first $176,100 of wages, capping the Social Security tax at $10,918.20.
- 1.45% Medicare tax on the first $200,000 of wages ($250,000 for joint returns, $125,000 for married taxpayers filing separately).
- 2.35% Medicare tax (1.45% regular Medicare tax plus an additional 0.9%) on wages exceeding $200,000 ($250,000 for joint returns, $125,000 for married separate filers).
For the self-employed in 2025, the tax rates will be:
- 12.4% Social Security tax on the first $176,100 of income, with a maximum tax of $21,836.40.
- 2.90% Medicare tax on the first $200,000 ($250,000 for joint returns, $125,000 for married separate filers).
- 3.8% (2.9% regular Medicare tax plus 0.9% additional Medicare tax) on income exceeding $200,000 ($250,000 for joint returns, $125,000 for married separate filers).
Wage Base History
The Social Security payroll tax was first implemented in 1937 with a wage base of $3,000. This remained unchanged until 1950. As wages grew, the wage base had to be adjusted to maintain adequate funding for the Social Security system. By 1980, it had risen to $25,900, reached $76,200 by 2000, and $137,700 by 2020. Adjustments to the wage base have been driven by inflation and wage growth.
Employees with Multiple Employers
If an employee works for multiple employers, both will be required to withhold Social Security taxes. Even if their combined earnings exceed the wage base, each employer must continue withholding. Employees will receive a tax credit for any excess Social Security tax withheld when they file their returns.
Looking Ahead
If you have any questions regarding payroll tax filing or payments, either now or for 2025, contact us. We’re here to ensure you remain compliant with tax regulations.
