Typically, when considering U.S. taxes, the higher your salary, the more taxes you’ll be expected to pay. That’s because the tax rate, called your tax bracket, increases as your income rises. Each dollar earned within a particular bracket is taxed at the relative rate. But one notable exception to this rule relates to payroll taxes used to fund Social Security’s Old Age, Survivors and Disability Insurance (OASDI) program.
Unlike many other tax cap limits, this stands as an individual limit. If a couple is married, each person would have a $147,000 limit.
The OASDI tax rate for wages in 2022 is 6.2% each for employers and employees. That means an employee earning $147,000 or more would pay a maximum of $9,114 into OASDI. Self-employed people are responsible for covering both the employer and employee share of OASDI contributions, so an independent contractor with income, after deductible expenses, totaling $147,000 or more would pay double that amount, or $18,228.
SSA.gov also reports that there is no taxable maximum for Medicare’s Hospital Insurance (HI) program in 2022. The tax rates for HI funding are 1.45% each for employees and employers, and 2.9% for self-employed people or independent contractors.
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