The Social Security Administration (SSA) has announced that individual taxable earnings up to $176,100 annually will be subject to Social Security tax in 2025. This marks an increase from the $168,600 wage base in 2024.
The wage base limit applies to earnings subject to the 6.2% OASDI tax (Old Age, Survivors, and Disability Insurance). At or above the wage base limit, employees and employers will each pay $10,918.20 in OASDI tax, an increase of $465 for both parties compared to 2024.
Medicare Taxes
The Medicare hospital insurance tax remains unchanged at 1.45% for both employees and employers in 2025. Medicare tax has no wage base limit, meaning it applies to all earnings.
Additionally, individuals with earned income exceeding:
- $200,000 (single filers),
- $250,000 (married filing jointly), or
- $125,000 (married filing separately)
will continue to pay an additional 0.9% Medicare tax under Sec. 3103(b)(2).
Self-Employment Tax
Self-employed individuals will pay a total 12.4% OASDI tax on net self-employment income up to the wage base, along with a 2.9% Medicare tax on all net self-employment income. These rates remain consistent with prior years.
Self-employed individuals can claim an above-the-line income tax deduction for half of the self-employment tax.
Cost-of-Living Adjustments (COLA)
The SSA also announced a 2.5% cost-of-living adjustment (COLA) for Social Security and Supplemental Security Income (SSI) benefits beginning January 2025.
The 2025 COLA follows a 3.2% adjustment in 2024 and an 8.7% adjustment in 2023.
Earnings Limits for Social Security Beneficiaries
In 2025, beneficiaries receiving Social Security benefits can earn up to:
- $62,160 in the year they reach full retirement age before benefits are reduced by $1 for every $3 in earnings over the limit. (Increased from $59,520 in 2024.)
- $23,400 if they are under full retirement age, before benefits are reduced by $1 for every $2 in excess earnings. (Increased from $22,320 in 2024.
Maximum Social Security Benefit
The maximum monthly Social Security benefit for workers retiring at full retirement age will rise to $4,018 in 2025, up from $3,822 in 2024.
This update from the SSA underscores adjustments driven by inflation and wage growth, ensuring that contributions and benefits remain aligned with economic trends. For more details, visit the Social Security Administration’s website for the official announcements. Please contact Delia Law for reputable tax strategy as to your federal benefits.
