The Social Security Administration (SSA) changes the system every year to protect people who get Social Security from the dreaded inflation. The most you can earn before Social Security taxes will go up from $168,600 to $176,100 in 2025.
Although this change may not seem important, it has a huge effect on millions of people and makes sure that the system keeps working for everyone.
What is this tax and how it works?
The Social Security system is funded through a 12.4% tax on labour income, which is split between employees and employers, each contributing 6.2% (meaning for every % you contribute, your employer contributes as well).
While this rate has remained unchanged since 1990, the income limit subject to this tax is adjusted annually to accommodate inflation and ensure the system receives the resources it needs to operate.
In 2025, for example, if you earn more than $176,100, only that amount will be subject to the tax. Income more than this limit will not be taxed by Social Security, so this is their way of keeping the system balanced.
Why does this cap occur?
Each year, those changes are made to adjust it to keep pace with the economy and ensure that the system doesn’t fall behind taxpayers. These adjustments ensure that contributions reflect changes in the cost of living and the needs of the system.
For example, just a decade ago, in 2015, the cap was $118,500. With adjustments made since then, the cap for 2025 will rise to $176,100, marking a significant increase that accounts for inflation and other economic factors.
| Year | Amount |
| 2025 | $176,100 |
| 2024 | $168,600 |
| 2023 | $160,200 |
| 2022 | $147,000 |
| 2021 | $142,800 |
| 2020 | $137,700 |
| 2019 | $132,900 |
| 2018 | $128,400 |
| 2017 | $127,200 |
| 2016 | $118,500 |
| 2015 | $118,500 |
And if I have more than one employer?
If you have more than one job, they will all take Social Security taxes out of your pay without talking to each other first. You might end up paying more than you need to. Do not worry, though; you can claim the extra money when you file your tax return with the IRS!
Does this benefit workers?
As a matter of fairness, workers with higher incomes contribute proportionally, which means they pay more, while workers with low and middle incomes continue to get Social Security benefits without having to pay more.
In this case, it is important to remember that the Cost of Living Adjustment (COLA) makes sure that retirees’ and other beneficiaries’ benefits do not lose value because of inflation.
This year, the Administration will also add 2.5% to Social Security payments. This means that you will get the extra money right away when they send you your monthly payments.
Remember that these changes show that the Social Security Administration is trying to stay up to date so that they can help as many people as possible in the best way possible. It can be annoying to keep up with everything, but it is important to do so that we do not miss anything and can keep our personal finances in the best shape possible!
