Employees, employers, and self-employed individuals all pay federal employment taxes—meaning Social Security and Medicare taxes—and the hits get bigger every year.

Here’s an update, along with suggestions on how to mitigate the pain.

How High Can My Social Security Tax Bill Be?

It may already be a lot bigger than you think!

If you are an employee, your wages are hit with the 12.4 percent Social Security tax, up to the annual wage ceiling. Half of the Social Security tax bill—equal to 6.2 percent—is withheld from your paychecks. The other 6.2 percent is paid by your employer, so you never actually see the second half go out of your pocket. But it still goes.

The Social Security tax wage ceiling for 2024 is $168,600 (up from $160,200 for 2023). If your wages meet or exceed the ceiling, the Social Security tax hit for 2024 will be a whopping $20,906 (12.4 percent x $168,600). As stated, half of that comes out of your paychecks. Your employer pays the other half.

The wage ceiling is projected to rise to $174,900 next year. The projected future-year increases are listed later in this article. You will not be pleased with the numbers.

Worse If You’re Self-Employed

If you are self-employed (as a sole proprietor, partner, or LLC member who is treated as a sole proprietor or partner for tax purposes), you know all too well how hard the Social Security tax can hit. That’s because you must pay the entire Social Security tax bill out of your own pocket, based on your net income from Schedule C multiplied by 0.9235 on Schedule SE. For 2024, the Social Security tax ceiling for net self-employment income (after multiplying by 0.9235) is $168,600 (same as the wage ceiling for employees).

So, if your net self-employment income for 2024 is $168,600 or more after the multiplication, you’ll get socked with the maximum $20,906 Social Security tax hit (12.4 percent x $168,600). Oof!

Projected Social Security Tax Ceilings for 2025-2033

The Social Security tax hit on your 2024 income is expensive enough, but it’s only going to get worse in future years—much worse, according to the Social Security Administration (SSA) projections.

That’s because the Social Security tax wage and self-employment income ceiling will continue to go up based on the inflation factor that’s used to justify the increases. In turn, maximum Social Security tax bills for high-earners will go up.

The latest SSA projections for Social Security tax ceilings for 2025-2033 are shown below, based on the so-called intermediate case numbers.1

$174,900 for 2025

$181,800 for 2026

$188,100 for 2027

$195,900 for 2028

$204,000 for 2029

$213,600 for 2030

$222,900 for 2031

$232,500 for 2032

$242,700 for 2033

These projected ceilings are bad enough. Could they get worse?

Absolutely, because the SSA projections sometimes undershoot the actual numbers. But let’s say the projected numbers pan out. If so, the maximum Social Security tax hit on wages and net self-employment income in ... Log in to view full article.