At EverythingHR, we strive to keep you informed about significant regulatory changes that impact your business operations and human resource practices. One such development is the increase in social security wage base, set to take effect on January 1, 2025. This update is crucial for employers to understand as it will impact payroll taxes.
The Social Security Administration (SSA) announced on Thursday, October 10, that the 2025 social security wage base will be $176,100, an increase of $7,500 from $168,600 in 2024. As in prior years, there is no limit to the wages subject to the Medicare tax; therefore, all covered wages are subject to the 1.45% tax. As in 2024, wages paid in excess of $200,000 in 2025 will be subject to an extra 0.9% Medicare tax that will only be withheld from employees’ wages. Employers will not pay the extra tax. Note that the $200,000 threshold for the Additional Medicare tax is not subject to adjustments for inflation.
The FICA tax rate, which is the combined social security tax rate of 6.2% and the Medicare tax rate of 1.45%, will be 7.65% for 2025 up to the social security wage base. The maximum social security tax employees and employers will each pay in 2025 is $10,918.20, an increase of $465 from $10,453.20 in 2024.
The social security wage base for self-employed individuals in 2025 will also be $176,100. There is no limit on covered self-employment income subject to the Medicare tax. The self-employment tax rate will be 15.3% (combined social security tax rate of 12.4% and Medicare tax rate of 2.9%) up to the social security wage base. In 2025, the maximum social security tax for a self-employed individual will be $21,836.40.
