As with any government program, the money to fund Social Security has to come from somewhere. If you’re wondering where it comes from, the answer is — your paycheck.
Social Security gets the bulk of its revenue from payroll taxes. When you see a deduction on your pay stub for FICA, that’s the sum you’re paying to help fund Social Security, as well as Medicare.
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However, it’s not a given that you’ll pay Social Security taxes on your entire salary. Each year, the Social Security Administration puts a wage cap in place that determines how much income is subject to Social Security taxes.
The Social Security wage cap is rising in 2025, compared to 2024. But that doesn’t necessarily mean your personal tax bill is going up.
Tax planning is a big part of managing your finances, so it’s important to know how much Social Security tax you may be on the hook for in 2025. And that’ll depend on your wages.
In 2024, the Social Security wage cap is $168,600. In 2025, that cap is rising to $176,100. This means that higher earners generally will pay Social Security tax on an additional $7,500 of income.
This also means that if you earn $100,000 a year now and continue to earn $100,000 a year in 2025, your personal Social Security tax bill won’t go up. While the wage cap for Social Security is rising in 2025, the Social Security tax rate is staying the same.
That rate is 12.4% of your income, up to the annual wage cap. And if you have an employer, you’ll split that bill evenly down the middle.
This means that if you earn $100,000 a year, you’re looking at paying $12,400 a year into Social Security. In reality, however, your employer is covering $6,200 and you’re paying the remaining $6,200 yourself. If you’re self-employed and earning $100,000, though, you’ll have to pay the entire $12,400 yourself.
It’s fair to say that most people don’t like paying taxes. Even if your personal Social Security tax bill isn’t increasing in 2025, you may not be thrilled about having to fork over that money.
But remember, without payroll taxes, Social Security wouldn’t exist. By paying those taxes, you’re helping to keep the program alive.
This doesn’t mean that every dollar you pay into Social Security is a dollar you’ll get back in retirement. But if you’re counting on Social Security to help fund your senior years, you’ll need to keep paying.
