4 Ways You Can Leverage the Social Security Tax Limit Change
Written by
J. Arky
Edited by
Cory Dudak
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You are working hard. You are paying your bills. You might think you have it all down to a science, but unless you are an expert in taxes, you might not be getting the most out of the tax-paying process — especially with the new Social Security adjustments. For 2025, the Social Security administration raised the tax limit to 4.4%. So, how can you make this new rule work in your favor?
GOBankingRates asked financial expert Shirley Mueller, the founder at VA Loans Texas, about ways you can leverage the Social Security tax limit change. This is what she had to share.
Maximize Your Earnings Before the Cap
According to Mueller, the amount of income by which a person’s earnings are subjected to a stoppage by the continuous Social Security tax is limited every year. However, for the 2025 tax filing, Mueller pointed out that this limit will halt increasing.
“The astute individual who can realize more might consider maximizing income to the new limit, thereby potentially reducing the tax burden in the future,” explained Mueller. “If you are self-employed or have some flexibility in your earnings, it may pay to accelerate income into the current year to maximize the Social Security benefits that would then get locked in at a much higher income amount.”
Additionally, Mueller noted that “…if you can secure a salary increase or have bonuses paid out before the cap is reached, these all might put more money into Social Security and raise your future benefits.”
Review Your Retirement Contributions
“If you’re near the limit on Social Security taxes, this is a good time to review your retirement plan contributions, especially to tax-deferred accounts like 401(k)s,” advised Mueller. “You can reduce your taxable income by contributing more to these types of accounts, which may delay additional taxes.”
Mueller described how this “…would immediately lower your taxes and still provide the Social Security benefits at the higher taxable level, without additional taxes eating into your take-home pay.”
Shifting Income Strategy
“You might be able to adjust your strategy regarding income as a business owner or a high-income earner,” advised Mueller, adding that “…if you can strategically pay yourself a lower salary and more in dividends — if you operate a corporation — that will reduce the amount of earned income subject to the Social Security tax.”
Mueller admitted that is a more involved approach. Any major moves should be discussed with a financial advisor or tax professional regarding its appropriateness for compliance, in Mueller’s professional experience, as well as making sure it aligns with your long-term financial goals.
Consider Future Social Security Benefits
“The rule change extends your window of opportunity to contribute more to Social Security and reap larger benefits in retirement, assuming that one would remain in the system,” noted Mueller.
“If you’re near your retirement age and the cap change means you’re likely to go over the threshold, then it may be in your best interest to continue paying a maximum amount into Social Security for a few more years,” Mueller highlighted.
“It will go toward a higher base for your benefits in retirement,” concluded Mueller. “In the long run, this could mean a bigger safety net in retirement.”
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