The Social Security Administration increases the maximum earnings for the year 2025 by $7,500 with the COLA adjustment for the payouts. This administration adjusts the taxable earnings for the Social Security taxes to keep pace with inflation and national wages.
The maximum income limit for the Social Security tax or OASDI (Old Age, Survivors, and Disability Insurance) means the earnings are subject to the payroll taxes, which later return to the people in the form of Social Security payments. The Social Security Administration gathers the funds through these taxes for the benefits they provides later.
Americans should keep an eye on the Social Security tax maximum income limit to plan their finances, as income above the limit is not subject to the OASDI taxes. With the changes in the limit, taxpayers should know the exemption, tax rate, and other things related to it.
| Maxi. Social Security Income Limit | $176,100 |
| Raised | By 4.4% for 2025 |
| COLA Adjustment | 2.5% |
| Tax rate | 6.2% for both the employee and the employer |
| Self-employed employee tax rate | 12.4% |
| Credits required to claim Social Security | 40 credits at least |
| Official Website | https://www.ssa.gov/ |
Max Taxable Earnings
The Social Security Administration changes the maximum income limit for the OASDI taxes based on the change in the national average wage index. The limit on earnings ensures people can save more for their retirement income, as with an increasing limit, people with an aging population who live longer will have the income to support their living expenses.
With the COLA announcement for 2025, the administration has boosted the maximum taxable earnings to $176,100, which is $7,500 higher than the 2024 year maximum earnings ($168,600).
The employer of household workers does not have to withhold payroll taxes unless the employee tells them to. The Medicare taxable earning has no limit; that is, with any income the US citizens have to pay the Medicare taxes.
Tax Rate 2025
Both the employer and the employee pay the same 6.2% base rate of Social Security taxes on the Americans’ maximum taxable earnings. However, if you are self-employed, you have to pay for both the employee and employer portions, which makes your tax rate 12.4 %.
Americans can understand the Social Security tax easily; if your income is equal to or more than $176,000, with a 6.2% tax rate, you will have to pay $10,918.20 in OASDI taxes in a year. If a person earns more than $176,000, let’s say $180,000, then he/she will pay taxes on the $176,100 income only; that extra will not be counted.
The working class or self-employed people should understand that once they reach the limit for the maximum Social Security tax ($10,918.20 for employees or double of it for self-employed), they do not have to pay into the fund in that year.
Exemption
All the US working class pays the Social Security taxes for the retirement income, however, some people are exempt from paying for the Social Security, such as:
- The members of religious groups do not pay Social Security taxes because the majority of them offer their members food, shelter, and other amenities.
- The people who are self-employed and earning not more than $400 a year do not need to pay the OASDI taxes.
- For a period of less than five years, international students with M-1, F-1, or J-1 status in the United States are excused from paying Medicare and Social Security taxes. They also enjoy an employment exemption if they work 20 hours per week or are training students, among other exemptions.
- The students in the US with resident alien status (F-1, M-1, or J-1)living in the US for more than 5 years do not pay OASDI taxes until they come under the Student FICA exemption.
- The non-resident or resident alien employed by an American or other country employer has to pay Social Security or medicare taxes, unless they come from the following classes of non-resident or immigrants:
- H-Visas holder
- G-Visa holders are employees of international organizations, however, it is not applicable to children or spouses of G-status persons.
- D-Visa holder, Crew members of an American aircraft or vessel, or ship
- M-Visa, J-Visa, F-Visa, and Q-visa holders are non-resident scholars, students, teachers, trainees, professors, researchers, or other aliens.
- A-Visa holders are foreign government employees, their families, servants are also exempted from paying the OASDI taxes.
When to claim benefits?
Americans who pay the Social Security taxes over the year when they are working get credit points from the administration. Americans should at least earn 40 credits (10 years of work) to claim the Social Security benefit; according to the SSA, taxpayers earn up to 4 credits annually.
Americans should understand that the number of credits does not affect your benefit amount; it only determines your eligibility for the benefit, as your circumstances, living situation, and income will decide your benefit amount.
The Social Security Administration suggests that Americans claim the Social Security retirement benefit a little later, at 70 years of age, to get the full or higher benefit. Though in general, Americans can claim retirement benefits at the age of 62, the fund may end early, as the payment comes from the taxes you paid.
File Social Security taxes
The Social Security taxes are generally withheld by the employer from your wages, so you do not have to pay the taxes; you only have to report the withheld taxes on the tax form. However, if you are self-employed or paying taxes for your employees, you can follow the steps below:
- The self-employed individuals can use the Schedule SE form with the tax form to pay their annual Social Security taxes with the annual federal tax return or through the quarterly tax payment.
- Employers report the Social Security taxes they paid for their employees on Form 941, which they submit with their taxes.
Manage your money wisely because the 2025 Social Security tax cap has been raised, which will raise retirees’ benefits in the following year.