4 Changes Coming to Your Paycheck in 2025
Written by
Laura Beck
Edited by
Ashleigh Ray
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The end of the year is nearly upon us — where does the time go!? As we gear up for 2025, it’s time to take a hard look at your paycheck. Spoiler alert: some changes are on the horizon, and they might just affect your bottom line.
GOBankingRates spoke to financial experts to get the skinny on whether or not your wallet could be getting fatter in 2025. Here are some potential changes to look out for next year.
Salary Increases: Don’t Get Your Hopes Up
Paul Carlson, a certified public accountant (CPA) and managing partner at Law Firm Velocity, brought some sobering news about salary increases. With over 15 years of experience in finance and accounting, Carlson knows his stuff when it comes to paycheck trends.
“The main takeaway is that salary increases are expected to dip,” said Carlson. “Employers are budgeting for average pay raises of around 3.5% to 3.9%, which is a step down from the 4% seen in 2023 and 3.6% this year.”
Why the slowdown? Carlson attributes it to a stabilizing economy and a cooling labor market. “After a wild ride of hiring and pay hikes during the pandemic, companies are tightening their budgets,” he said.
But before you start pinching pennies, there’s a silver lining.
Carlson pointed out, “There’s a strong push for pay equity happening. About 70% of employers are planning to make adjustments to ensure fair pay across the board.”
So, if you’ve been in a historically underpaid role, you might see some positive movement in your paycheck.
Social Security Withholding: a Bump for High Earners
Anthony Termini, an investment analyst, stock market commentator and expert for Annuity.org, noted a significant change in Social Security withholding.
“There is really only one change coming to Americans’ paychecks in 2025,” Termini shared. “The ‘wage base’ to which Social Security taxes apply is rising. Right now, withholding for Social Security taxes stops when a person’s year-to-date pay hits $168,600. It ratchets up to $174,900 next year.”
What does this mean in dollars and cents? Termini breaks it down: “That means a person who expects to make $175,000 in 2025 would be subject to an additional $396.80 in Social Security withholding (for the whole year, not per paycheck).”
But before you start sweating, Termini reassures us that most workers won’t feel this pinch.
“Most working people will never see any additional withholding,” he said. “The reason for this is that the median household income is currently about $78,000. For these folks, virtually all of their earnings are subject to Social Security taxes.”
The Inflation Factor
Carlson also reminded us not to forget about our old frenemy, inflation.
“Inflation is still a big factor right now,” he points out. “Companies are feeling the pressure from rising costs but are also realizing they can’t keep raising salaries like they used to. A lot of businesses are projected to keep their salary budgets pretty much the same as last year.”
Potential Tax Withholding Changes
Termini hinted at another potential change that could affect your take-home pay.
“There could be a second change in people’s paychecks if they update their W9s at the beginning of the year,” he said. “This is because many payroll providers include the standard deduction to help calculate withholding rates.
“If the IRS indexes (raises) the standard deduction, that might create a (very slight) decrease in a person’s calculated federal income tax withholding.”
The Final Word
So, to wrap it all up: Major shakeups most likely aren’t on the horizon, but perhaps smaller shifts will be felt in your paycheck.
Higher earners might see a little more money go into Social Security and other people could benefit from pay equity adjustments. Salary increases might not be as strong as they’ve been, but there’s a potential decrease in tax withholding that could provide a nice boost.
Of course, these are all just projections based on trends and, as always, things can change. Stay informed, keep an eye on your paycheck and always talk to your employers about fair compensation.
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