Taxesare something all workers should be familiar with. If you know the amount of money you will have to pay Social Security on taxes, you can design a much better budget. Drawing up a savings plan in order to have enough in retirement can be possible if you have a monthly budget. Those workers who stick to their budget, save money, and pay taxes on time have more chances to get a comfortable retirement.
Social Security taxes are different every year in most cases. There are some things that may not change, but more often than not they need to be up to date. It is due to inflation and the Cost of Living Adjustment that these changes take place. Helping workers keep their purchasing power and be able to grow their nest egg is essential. Let us disclose those earnings that are subject to taxes in this new tax year.
What is the new tax limit according to Social Security in 2023?
According to Social Security, the taxable maximum is 160,200 dollars in 2023. Basically, once you have managed to earn as much as $160,200 and you earn more than that, you do not have to pay Social Security more during that year. Therefore, those exceeding earnings are not subject to taxes.
Bear in mind that the amount workers have to pay is 6.2% of their earnings in Social Security taxes every year. It is true that if a worker pays 6.2 of their earnings, the employer will have to match that tax payment. Together, they pay up to 12.4%. It will depend on the type of worker you are though
How much do self-employed workers have to pay to Social Security?
Self-employed workers will have to pay 12.4% of their earnings in Social Security taxes. As they do not have an employer to match their taxes, they will have to do it on their own. Those whose earnings are higher than 160,200 dollars will only have to pay taxes until they reach that taxable maximum.
In this way, those exceeding earnings are not necessary to work out Social Security benefits. So, if you earn more than $160,200 will not increase the payments of your retirement or disability benefit in the future. Apart from this, workers who get $160,200 will end up paying $9,932.40 in taxes to Social Security.