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The federal government sets a limit on the amount of income subject to Social Security tax, which you pay while you work, and is used to fund benefits for current beneficiaries.
Once you are eligible, current workers will contribute to the program so that you can collect benefits. The longer you wait to apply for benefits (up to age 70), the more you will receive.
According to the Social Security istration (SSA), in 2024, approximately 68 million people received Social Security benefits each month.
The average benefit for retirees was about $1,927 dollars. These benefits will increase in 2025 due to the cost of living adjustment (COLA). Benefits for retirees will rise to about $1,976 dollars per month.
These payments are funded by the Social Security tax, also known as the Old-Age, Survivors and Disability Insurance (OASDI).
The tax has two parts:
- The payroll tax required by the Federal Insurance Contributions Act (FICA) and the self-employment tax required by the Self-Employment Contributions Act (SECA).
- The Medicare tax, or hospital insurance tax.
Payroll taxes are based on the employee's gross salary, wages and tips. These taxes are usually withheld by the employer and transferred to the government on behalf of the employee.
Currently, the Social Security tax rate is 6.2% for the employer and 6.2% for the employee.
Medicare taxes are also split evenly between the employer and employee, with a total tax rate of 2.9%.
What is the current maximum taxable earnings for Social Security?
For 2025, the Social Security tax limit is $176,100, which means that the maximum amount of Social Security tax an employee will pay (through payroll withholding) in 2025 is $10,918.20, or 6.2% of $176,100.
While an employed person pays half of the total tax and their employer pays the other half, if you are self-employed, you pay both the employee and employer rate: 6.2% each, or 12.4%.