Copyright CNBC
Vm | E+ | Getty Images Next year, millions of workers will be subject to a new maximum earnings threshold for Social Security payroll taxes. The Social Security maximum taxable earnings will be $184,500 in 2026, up from $176,100 in 2025. That number, also called the wage base, represents the limit on earnings subject to the Social Security payroll tax and is adjusted each year. The Social Security Administration detailed the change on Friday as part of its announcement about the 2.8% cost-of-living adjustment in 2026 for Social Security and Supplemental Security Income benefit payments. The news, originally slated for Oct. 15, was delayed due to the federal government shutdown. The annual increase to the cap is based on the national average wage index. Some high earners may see more payroll taxes withheld in 2026 as a result of the higher wage base. Only 6% of workers earn more than the taxable maximum, according to 2024 data from SSA. The adjustments come amid continued worries about Social Security's trust fund shortfall, and raising the taxable maximum is one of many options that have been floated to close the funding gap. Hitting the cap can maximize retirement benefits Once a worker hits the cap, they are done paying into Social Security for the year. In 2025, workers who earn $1 million or more maxed out as of March 6, according to the Center for Economic and Policy Research. While high earners and entrepreneurs have some opportunities to defer income, Catherine Valega, a certified financial planner and enrolled agent at Green Bee Advisory in Burlington, Mass., said she likes for her clients to try to hit the Social Security wage base every year, if possible. Those annual wages may be used as part of the 35 highest-earning years the Social Security Administration uses to calculate your retirement benefits, Valega said. Business owners, who may be tempted to file taxes as an S-corp to avoid paying self-employment taxes, will sacrifice earnings that count toward their retirement benefits, Valega said. Likewise, women who step out of the workforce for caretaking duties may see reduced retirement benefits later on, she said. "Everyone should be thinking about Social Security, not just those approaching claiming age, because by that time, it is too late to make any impact on your income," Valega said. How Social Security payroll taxes work The Social Security payroll tax includes a 6.2% tax paid by both employees and employers. In 2026, individuals who have wages equal to or greater than $184,500 would pay $11,439 to Social Security's Old-Age, Survivors and Disability Insurance program, while their employers would pay the same amount. That's more than the roughly $10,918 those workers and their employers contribute under the $176,100 taxable maximum in 2025. Individuals who are self-employed pay a 12.4% rate. watch now Workers also pay additional payroll taxes towards Medicare — 1.45% each for workers and their employers, or 2.9% for those who are self-employed. However, there is no limit to the earnings that can be subject to those levies. Higher earners — individuals earning more than $200,000 and married couples with more than $250,0000 — may separately pay an additional 0.9% Medicare tax.
