Over the past few weeks we have seen how inflation has affected various aspects of American life, and little has been said about the effects it has on Social Security taxes.
We have to start explaining from the root. If you are an employee, your salary is affected by the payment of federal taxes but also by those taxes paid from Social Security, which are 12.4% up to the top of the annual salary. Half of this percentage, that is, 6.2% is withheld from your paycheck of each month. The other half is paid by your employerso you never really see this amount reflected in your salary.
The Social Security tax salary cap for 2022 is $147,000. If your salary exceeds this amountthen the Social Security tax you will pay is $18,228 for 2022. According to projections, by 2023 that salary cap will increase to $155,100.
If you work as an independent, then you have to pay only 12.4% of Social Security taxes. Now, inflation has an impact in the following way: the maximum limit of Social Security taxes will increase according to it. In the same way they will increase the maximum Social Security tax bills for people with high incomes.
According to projections from the Social Security Administration (SSA), lSocial Security tax ceilings for 2023-2030are the following:
-$155,100 dollars by 2023.
-$165,300 dollars by 2024.
-$173,400 dollars by 2025.
-$180,600 dollars by 2026.
-$188,100 dollars by 2027.
-$195,600 dollars by 2028.
-$203,100 dollars by 2029.
-$210,600 dollars by 2030.
According to MarketWatch experts, these numbers could worsen if projected inflation is much higher. Added to this context are the estimates made that Social Security will exhaust its trust funds in 2034, so given this fact, it is very likely that legislators will decide to increase Social Security taxes even more, otherwise it will be the fall of benefits for millions of US employees.
***
You may also like:
-Social Security is updating its website: what you can do from now on
-Social Security: Why Most Americans Won’t Reach Maximum Benefits in Retirement
–
