Social Security Taxable Wage Cap to Jump in 2023
Author: Robert S. Teachout, XpertHR Legal Editor
October 13, 2022
The near 40-year high annual inflation rate means not only an increase in consumer prices, but also a significant increase in the Social Security payroll tax wage cap.
The Social Security Administration (SSA) announced today that, for 2023, the maximum earnings subject to the Social Security payroll tax will increase nearly 9% to $160,200 (from $147,000 in 2022). The SSA also posted a fact sheet summarizing the 2023 cost-of-living adjustments (COLAs), which are based on the increase in average wages.
In 2023, there will continue to be no limit to the amount of wages subject to the Medicare tax rate of 1.45%. In addition, wages that exceed $200,000 will continue to be subject to the extra 0.9% Medicare tax, which is only paid by employees.
Employers and employees each contribute into the Social Security retirement system via Social Security and Medicare (FICA) taxes. The total FICA tax rate (6.2% for social security plus 1.45% for Medicare) will remain unchanged at 7.65% for 2023, up to the $160,200 social security taxable wage cap.
The maximum social security tax employees and employers will each pay in 2023 is $9,932.40, which is an increase of $818.40 (from $9,114.00 in 2022).
Employees whose compensation exceeds the current 2022 taxable earnings cap of $147,000 may notice an increase in their FICA withholding beginning next January due to the payroll tax adjustment, resulting in a slight decrease in their net take-home pay.