Social Security Tax Limit Rises for 2027: Who Will Pay More?
A 4.2% higher wage base means more taxes for some earners next year.
You probably know that money is taken out of your paycheck to help fund the Social Security program. But did you know there's a limit on how much of your income is subject to the tax? That threshold is rising in 2027, which means higher-paid workers could see more money withheld from their paychecks next year.
The Social Security Administration (SSA) just announced a new wage base for 2027 (roughly 4.2% higher than the 2026 tax limit), along with the annual cost-of-living adjustment (COLA) for more than 70 million Social Security recipients.
The new 3.6% COLA will boost monthly checks for beneficiaries, while the wage base determines how much of a worker's income is subject to Social Security payroll taxes.
Also worth noting: These updated numbers come as some lawmakers weigh proposals to shore up Social Security — including whether to eliminate the Social Security tax cap. Here's more to know.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
New 2027 Social Security payroll tax limit
Every year, the SSA sets a limit on how much of your earnings can be taxed for Social Security. Any money you earn above this limit — also called the tax cap or wage base — isn't taxed and doesn't count toward your future retirement benefits. This limit usually goes up each year based on average wage changes across the country.
For 2027, the tax limit is $192,300, up about 4.23% from $184,500 for 2026.
High Earners: If you're at or above the taxable limit, you will pay the 6.2% tax on more of your income.
- The maximum tax an employee will pay in 2027 is $11,922.60, up from $11,439 for 2026.
- The taxable wage base is increasing by $7,800.
- So, an employee earning at least $192,300 will pay an additional $483.60 in Social Security taxes in 2027 (i.e., 6.2% of $7,800).
Other Workers: If your income is below the taxable limit, all of your income is already subject to Social Security tax.
Note: The wage base also matters for future benefits. Social Security uses a worker's earnings history to calculate retirement benefits, generally based on the highest 35 years of indexed earnings. Earnings above the annual cap don't count toward that calculation.
How much Social Security is taken from a paycheck
Employees pay 6.2% of covered wages toward Social Security, and employers pay another 6.2%. The combined rate is 12.4%. Self-employed workers generally pay both portions, for a combined rate of 12.4% on net earnings up to the annual wage base.
Self-employed individuals can generally deduct the employer-equivalent portion of their self-employment tax when calculating adjusted gross income (AGI).
It's also important to distinguish Social Security taxes from Medicare taxes.
- Medicare payroll taxes don't have the same wage cap.
- Employees generally pay 1.45% in Medicare taxes on all covered wages, and employers pay another 1.45%.
- Higher-income workers may also owe an additional 0.9% Medicare tax on wages above $200,000 for single filers and $250,000 for married couples filing jointly.
- Those thresholds are separate from the Social Security wage base.
Who is Exempt From Social Security Tax?
Some people don’t have to pay Social Security taxes.
Examples are listed here, but other exemptions may be available.
- Certain members of religious groups or organizations
- Students and certain young (minor) workers
- Employees of foreign governments
- People the IRS considers to be "nonresident aliens"
Will the Social Security tax cap be eliminated soon?
As Kipliner has reported, Sens. Elizabeth Warren, D-Mass., and Bernie Moreno, R-Ohio, are calling for the elimination of the Social Security payroll tax cap. The proposal would require people with higher wages to pay Social Security taxes on more of what they earn.
If the tax cap were eliminated and assuming the 2026 limit, a worker earning $1 million, for example, would have another $815,500 of wages subject to the Social Security tax.
At the current 6.2% payroll tax rate, that would be about $50,561 more in Social Security taxes for the employee. The employer would generally owe another $50,561.
Warren and Moreno say the additional revenue could help protect Social Security benefits without raising the payroll tax rate for most workers (i.e., those whose wages remain below the taxable maximum).
But changing the Social Security tax cap would be more complicated than simply asking high earners to pay more taxes. Key questions Congress would have to address include how to change the cap and whether additional taxes would increase Social Security benefits for high earners.
- As mentioned, Social Security benefits are based in part on a worker's earnings history, and under current law, earnings above the existing cap don't count toward benefit calculations.
- Ultimately, the financial effect of eliminating the cap would depend partly on whether and how those additional earnings would be credited toward benefits.
For now, there's no major legislative change involving the tax limit, except for the just-announced annual adjustment.
Still, the debate surrounding Social Security taxes comes as the Social Security program faces a long-term funding shortfall. According to the 2026 Social Security Trustees Report, the retirement and survivors trust fund is projected to be depleted in late 2032 if Congress doesn't act.
At that point, continuing revenue would pay 78% of scheduled benefits. That could mean a 22% cut in benefits across the board. Stay tuned.
Related
