Social Security Wage Base and Earnings Test Amounts Increase in 2023

The Social Security Administration (SSA) recently announced that the "wage base" for computing Social Security tax will increase for 2023 to $160,200. This is up from $147,000 for 2022.

Federal law limits the amount of earnings that are subject to the Old-Age, Survivors, and Disability Insurance (OASDI) tax in a given year. This threshold, referred to as the Social Security wage base, means that if you earn more than $160,200, you won't pay OASDI tax on the amount above that.

Workers will continue to be taxed at the 6.2% OASDI tax rate on wages up to this base amount.

Adding It Up

In addition, employees must pay Medicare tax on all wages. For 2023, an employee will pay:

• 6.2% Social Security tax on the first $160,200 of wages, making the maximum tax $9,932.40 (6.20% times $160,200), plus
• 1.45% Medicare tax on the first $200,000 of wages ($250,000 for joint returns; $125,000 for married taxpayers filing a separate return), plus
• 2.35% Medicare tax (regular 1.45% Medicare tax plus 0.9% additional Medicare tax) on all wages in excess of $200,000 ($250,000 for joint returns; $125,000 for married taxpayers filing a separate return).

Self-Employed Individuals

The Social Security and Medicare tax rates for self-employed individuals are doubled. However, these taxpayers can deduct half of these employment tax payments on their federal income tax returns to arrive at adjusted gross income

So for 2023, self-employed people will pay:

• 12.4% Social Security tax on the first $160,200 of self-employment income, plus
• 2.90% Medicare tax on the first $200,000 of self-employment income ($250,000 of combined self-employment income on a joint return and $125,000 on a separate return) plus
• 3.8% (2.90% regular Medicare tax plus 0.9% additional Medicare tax) on all self-employment income in excess of $200,000 ($250,000 of combined self-employment income on a joint return and $125,000 for married taxpayers filing a separate return).

The SSA also announced that Social Security and Supplemental Security Income (SSI) benefits will increase by 8.7% in 2023. The average monthly Social Security benefit will increase from $1,681 to $1,827, and the maximum federal SSI monthly payment to an individual will increase from $841 to $914. The maximum federal SSI monthly payment to a couple will increase from $1,261 to $1,371 in 2023.

Want More Information?

If you have questions about Social Security tax or benefits and how they affect you, consult with your tax and financial advisors.