What Is the Maximum Taxable Income for Social Security for 2023?
As a worker, there’s a limit on the amount of your earnings that are taxed by Social Security. This is known as maximum taxable earnings, which shifts on a yearly basis in line with changes in the national average wage index. For 2022, that amount is $147,000, but the Social Security Administration (SSA) has suggested several provisions that could modify that amount in 2023.
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The OASDI tax rate for wages paid in 2022 is currently set at 6.2% for employees and employers, each. For self-employed workers, the rate is 12.4%. According to the SSA, a worker with wages equal to or larger than $147,000 would contribute $9,114.00 to the OASDI program in 2022, and his or her employer would contribute the same amount. If the worker is self-employed, they would contribute the full amount of $18,228.
For 2023, the SSA has provisions that could either modify the current OASDI payroll tax rate of 12.4% or the taxable maximum. CNBC reported that a recent congressional proposal aims to apply the payroll tax on wages of $400,000 and up to help address Social Security’s solvency problem. This means that earnings up to $147,000 would still be taxed, but would not be applied again until wages reached $400,000.
Two other suggested provision aims to apply the OASDI 12.4% payroll tax rate on earnings above $250,000 or $300,000 starting in 2023, which would tax all earnings once the taxable maximum exceeds $250,000 or $300,000.
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According to the SSA, other provisions — grouped into broad categories of action — potentially include, but are not limited to:
- Increasing the payroll tax rate, with no changes in the taxable maximum. Example: “Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage point each year from 2027-2046, until the rate reaches 14.4 percent in 2046 and later,” per the SSA.
- Taxing all earnings above the current-law taxable maximum. Example: “Eliminate the taxable maximum in years 2022 and later, and apply full 12.4 percent payroll tax rate to all earnings. Provide benefit credit for earnings above the current-law taxable maximum,” per the SSA.
- Taxing a portion of earnings above the current-law taxable maximum. Example: “Increase the taxable maximum such that 90 percent of earnings would be subject to the payroll tax (phased in 2022-2031). Provide benefit credit for earnings up to the revised taxable maximum,” per the SSA.
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