The Social Security tax limit, or the wage base is the maximum amount of earnings subject to the Social Security payroll tax.
If you are currently working, you and your employer each pay 6.2% of wages in Social Security taxes per paycheck.
There is, however, an income limit beyond which the 6.20% tax does not apply. This threshold is known as the Social Security Wage Base.
The Social Security Wage Base typically goes up every year. In 2019, that limit was $132,900. We will cover the 2020 increase in the Wage Base below.
However, before we do that, it’s important to explain what the Social Security tax is all about.
This post will cover:
What Is Social Security Tax?
Social Security Tax Limit 2020
What Is Social Security Tax?
The Social Security tax is the amount of money taken from your earned income to fund the Social Security program.
Employees and their employers across the country pay to fund the benefit payments that retirees receive.
The idea is that you contribute to Social Security benefits throughout your career. Then, once you retire, current workers will keep contributing to the fund while you receive benefits.
Social Security Tax Limit 2020 (Wage Base)
The Social Security Administration (SSA) projects the social security wage base will be $136,800 in 2020 (up from $132,900 in 2019).
In addition, the SSA projects that the wage base will increase to $191,100 by 2028.
About 177 million U.S. wage earners will pay Social Security taxes next year.
Among them, nearly 12 million workers who earn above $136,800 will see more of their earnings taxed because of the increase in the base wage.
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