The Administration needs to keep updating payments and taxable maximums. Despite the fact that Social Security may help seniors who are receiving retirement benefits, or SSI and SSDI beneficiaries get more money with the COLA increase, there are more changes.
For your information, the Social Security Administration needs to look for ways to fund the program. A recent report from the Board of Trustees revealed that there will be a lack of money to pay 100% of benefits by 2034.
Every month workers pay payroll taxes and they help Social Security pay retirement and SSDI benefits. The Administration does not save the money to pay you in the future. They use your taxes to fund the current retirement or SSDI benefits.
What is the maximum limit on earnings for withholding of Social Security tax?
The maximum amount of earnings that the Social Security Administration will tax will be 168,600 in 2024. However, it is still $160,200 in 2023. The percentage or the tax rate you must pay for the work you do is 6.20% in both 2023 and 2024.
Nevertheless, as the new taxable maximum has increased, the amount of money some Americans with high earnings will end up paying in 2024 will be higher. For example, if you earn $160,200 in 2023 or more, you will have to pay Social Security 9,932.40.
If your earnings are $168,600 or higher, you will have to pay $10,453.20 in 2024. As you can see, the Administration will get more money from taxpayers in 2024. But retirement, SSDI, and SSI recipients will also cash more money.
As a matter of fact, those who are high earners in the United States will have to pay $520.80 extra in 2024. This could be a problem if you are a a really tight budget and you may have a lot of earnings but a lot of expenses too.
Is there a limit on the amount of earnings that are subject to Medicare tax?
According to the Internal Revenue Service (IRS), there is “no wage base limit for Medicare tax”. As a consequence, all covered wages as subject to tax for Medicare.
While the current tax rate for workers paying Social Security is 6.2% and the employer another 6.2%, the Medicare tax rate in 2023 is just 1.45 percent for each of them. So, in total the employer and the employee are paying 2.9%.
If you have just started working you should know that 6.2% and 1.45% of your payroll goes to fund Social Security and Medicare. So, you will receive less money every month for this reason.
Obviously, it will pay off in the future when you can no longer work or you need medical assistance. In total, you will end up paying 7.65% between the tax rate for SSA and the one for Medicare.