How the 2025 Social Security payroll tax limit may affect you

The social security payroll tax rate is 12.4%, and employees pay 6.2% through payroll deductions. Employers pay the remaining 6.2%.

According to the Social Security Administration, in 2025, workers will pay 6.2% on earnings up to $176,100, for a maximum of $10,918.20. Once employees reach this maximum amount, they will no longer contribute to the program for the remainder of the year.

According to Lovison, who is also a chartered accountant, the 2025 adjustment has a greater impact on the self-employed because “they pay both sides,” meaning they owe the full 12.4%.

The government also collects 2.9% in Medicare payroll taxes, with employees and employers each paying 1.45%. However, there is no cap on taxable income for Medicare.

Self-employed workers are also responsible for both sides of the Medicare tax, totaling 15.3% between Social Security and Medicare. However, you can deduct 50% of self-employment taxes from your individual tax return, even if you do not report individual taxes.

Social Security's latest adjustments come amid growing concerns about the program's solvency. The trust funds used to pay out benefits are expected to be depleted in 2035, according to the trustees' May report.

Meanwhile, some advocates have pushed to increase Social Security's wage base to provide more funding.

The Social Security Administration's 2024 Trustee Report describes more than 150 options for closing the funding gap, including ways to cut benefits and increase revenue.

“The biggest financial gain clearly comes from eliminating the taxable cap,” Alicia Munnell, director of the Center for Retirement Research at Boston College, wrote of the report in August.

But future changes are unclear as control of Congress and the White House is uncertain.