Heads up: The Social Security wage base is projected to increase next year, according to the annual report from the Board of Trustees of the Social Security Fund.
That means employers will have to shell out more in taxes on wages for highly compensated employees. Be sure to pass this information on to your Payroll pros so they can start planning now.
Next year’s estimate
For 2023, the trustees estimate that the taxable wage base will be $155,100, up $8,100 from the current wage base of $147,000. This projection is based on current laws and existing cost of living benefit increases, and it takes into account the impact the COVID-19 pandemic had on the country’s economy.
Based on the current Social Security tax rate of 6.2%, employers would pay $9,616.20 on that amount, and employees would pay the same amount directly from their pay.
Potential Social Security changes
These rates may change in some form in the future. The board is currently projecting that the Social Security trust fund has enough funds in its reserves right now to pay full benefits on time through 2034. After that, available funds would only be able to cover a portion of Social Security benefits.
New legislation is needed to prevent Social Security funds from becoming entirely depleted, the board said. Laws that could solve the problem include proposals to raise the Social Security tax rate for employers and employees or increase the wage base.
Looking forward
Time will tell if laws will be introduced that increase employers’ tax liability to add funds. For now, based on existing legislation, the board lists the following wage bases for the next several years:
- $165,300 in 2024
- $173,400 in 2025
- $180,600 in 2026
- $188,100 in 2027
- $195,600 in 2028
- $203,100 in 2029
- $210,600 in 2030, and
- $218,400 in 2031.
SSA typically announces the actual taxable wage base for the upcoming year in the fall. We’ll keep you updated once the final wage base is released.
