Individual taxable earnings of up to $176,100 annually will be subject to Social Security tax in 2025, the Social Security Administration (SSA) said Thursday.

The amount, an increase from $168,600 in 2024, is the wage base limit that applies to earnings subject to the 6.2% OASDI tax (old age, survivors, and disability insurance). At or above the wage base limit, the employee and the employer each will pay $10,918.20 in tax, an increase of $465 for each party in 2025.

The Medicare hospital insurance tax of 1.45% each for employees and employers remained unchanged for 2025 (it has no wage limit). Individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly and $125,000 for married taxpayers filing separately) pay an additional hospital insurance tax under Sec. 3103(b)(2) of 0.9% of wages with respect to employment (also unchanged).

Self-employed individuals pay self-employment tax equal to the combined OASDI and Medicare taxes for both employees and employers (i.e., 12.4% of net self-employment income up to the OASDI wage base plus 2.9% in Medicare taxes on any amount of net self-employment income, with an offsetting above-the-line income tax deduction of half of the self-employment tax (also unchanged)).

COLA adjustments

The SSA also announced Thursday a cost-of-living adjustment (COLA) of 2.5% for both Social Security and Supplemental Security Income (SSI) benefits beginning in January 2025. The Social Security benefits COLA, which is based on the consumer price index, rose 3.2% a year ago and 8.7% two years ago.

In 2025, retirees receiving Social Security benefits will be able to earn $62,160 in the year they reach full retirement age before their benefits are reduced by $1 for every $3 in earnings over the limit. That is an increase from $59,520 in 2024.

Beneficiaries younger than full retirement age can earn up to $23,400 in 2025 before their benefits are reduced by $1 for every $2 in excess earnings, up from $22,320 in 2024.

The maximum Social Security benefit for a worker retiring at full retirement age will increase to $4,018 per month in 2025, up from $3,822 in 2024.