Current Social Security Maximum Taxable Earnings
What Is Social Security Withholding?
The Social Security tax is a federal tax imposed on employers, employees, and self-employed individuals. It is used to pay the cost of benefits for Social Security recipients, survivors of recipients, and disabled individuals and is referred to as OASDI, or Old-Age, Survivors and Disability Insurance. The Social Security tax is one of the payroll taxes paid by employees, employers, and self-employed individuals each year known as FICA (Federal Insurance Contributions Act) taxes. Medicare tax is the other tax in this package. There is no maximum taxable income for the Medicare tax, but there is an additional Medicare tax of 0.9% for high-income single taxpayers with earned income of more than $200,000 (and more than $250,000 for married couples filing jointly). The Social Security tax rate for both single and married taxpayers is 2022 is 12.4%; both the employer and the employee pay 6.2% of the employee’s salary. The standard Medicare rates are 1.45% for each, for a total of 2.9%. Therefore, the total FICA tax amount is 15.3%.
Rules About Social Security Maximums
If the employee makes more than the maximum taxable income level set by the Social Security Administration, different rules regarding withholding come into effect.
Employer
The employer must withhold Social Security and Medicare taxes from employees on pay subject to Social Security, up to the maximum amount each year. They must pay Social Security taxes for each employee for earnings up to the Social Security maximum.
Employee
The Social Security cap is the maximum amount that your employer will withhold from your paychecks during the year. If you have more than one job, each employer will withhold up to the maximum.
Self-Employed Worker
If you are self-employed, you must pay Social Security and Medicare taxes on your self-employment earnings, which are your net earnings on your business tax return. Since you are not an employee, these amounts aren’t withheld during the year. You must estimate the self-employment tax and income tax you owe from business earnings and make quarterly estimated payments. If too much Social Security tax has been withheld, you can claim a refund from the IRS of those Social Security taxes withheld that exceeded the maximum amount when you file your tax return the following year. For example, if your only income in 2022 is from self-employment, and the net earnings you report on your business tax form are $145,000, your Social Security and Medicare taxes would apply to the 2022 maximum of $147,000.
