SSA 2025 Cost of Living Adjustments: What Employers Need to Know

By Stephanie M. Casey, CPA, Tax Senior Manager

SSA 2025 Cost of Living Adjustments: What Employers Need to Know

Overview of Social Security wage base changes

The Social Security Administration (SSA) has announced the annual cost-of-living adjustment to the maximum amount of earnings subject to Social Security tax (i.e., the taxable wage base).

For payroll and some 401(k) plans that provide for profit -sharing contributions, employers should take note of the following changes that begin on January 1, 2025.

2025 maximum earnings cap for payroll taxes

Payroll2025 Maximum Earnings2024 Maximum Earnings
Social Security$176,100$168,600

For 2025, employers must withhold the following amounts:

Tax TypeRateWage LimitMaximum TaxChange from 2024
Social Security6.2%$176,100$10,918.20Up from $10,453.20

*Note – Medicare and social security taxes are collected together, under the umbrella of the FICA (Federal Insurance Contributions Act) tax. There have been no changes to the Medicare rates for 2025.

Changes for employees who continue working while collecting Social Security benefits

Social security can be collected starting at age 62. Beneficiaries under the full retirement age who are still working receive a reduced monthly benefit if they earn more than the annually adjusted threshold. Full retirement age for beneficiaries born in 1957 is 66 years and 6 months. For beneficiaries born in 1958 the age is 66 years and 8 months.

For 2025, $1 in benefits will be withheld for every $2 in earnings above $23,400 (increase from $22,320 in 2024). Those who will reach retirement age during 2025 will have $1 in benefits withheld for every $3 in earnings exceeding $62,160 (up from $59,520) until the month they reach full retirement age. Beyond that month, there is no limit.

Next steps for employers

Prepare your business and your employees before January 1, 2025, by taking the following steps:

  • Notify employees whose earnings exceed the current 2024 cap of $168,600 of the increase and how it may impact their net take home pay during 2025.
  • Modify your payroll systems to account for the higher taxable wage base of $176,100

Your Keiter Opportunity Advisors will continue to keep you updated on new and changing regulations that may impact your business.

Additional business insights

Beneficial Ownership Information Reporting Deadline is Approaching

Article Sources:

Share this Insight:

About the Author


Stephanie M. Casey

Stephanie M. Casey, CPA, Tax Senior Manager

Stephanie is a Tax Senior Manager at Keiter. Her areas of expertise include tax consulting, compliance and research for high net worth individuals, partnerships, and closely held multi-state corporations. Stephanie also has experience with a wide variety of industries including transportation services, real estate development, and construction. She is a member of the Firm’s Family & Executive Advisory Services team.

More Insights from Stephanie M. Casey

The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.

Categories

Contact Us