The Social Security Administration (SSA) just announced two key updates for 2026: the new cost-of-living adjustment (COLA) and the updated Social Security tax wage base.
You’ve probably heard a lot about the COLA, but fewer people realize there’s a cap on how much of your earnings are subject to the Social Security payroll tax. This “wage base" (also known as the Social Security tax limit or wage cap) sets the maximum amount of income that can be taxed to help fund the program each year.
That's important since payroll taxes help fund Social Security, which more than 68 million Americans rely on for retirement, disability, or survivor benefits.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
But the higher the wage cap, the more income is taxed, which particularly affects higher earners.
Here’s how that limit is changing for 2026 and what it could mean for your paycheck.
Social Security wage base 2026
The Social Security tax limit (aka wage base) will increase by about 4.8% to $184,500 for 2026.
The amount is adjusted annually for inflation. However, it’s important to note that the wage base and SS COLA are calculated using distinct methods and data sets.
The tax limit changes are particularly significant for high-income earners, who may pay more Social Security tax on their earnings next year. So, understanding the adjustment is crucial for effective financial planning.
Social Security tax rate
As noted, the 2026 Social Security tax limit rises to $184,500 for 2026. (The 2025 tax limit was $176,100.)
This 4.77% increase is less than the 5.2% jump from 2023 to 2024 but more than the 4.4% increase from 2024 to 2025.
Still, if you earn more than $176,100 this year, 2025, you haven’t had to pay the Social Security payroll tax on the amount of your income that exceeds that limit.) That can result in considerable tax savings.
- Take, for example, an employee with a 2025 annual salary that exceeded the tax limit by $10,000. Since the Social Security tax rate is 6.2% (your employer also pays 6.2%), they would save $620 on Social Security taxes.
- On the other hand, someone who earns wages exceeding the base by $30,000 would receive a $1,860 tax break.
- The more you make over the tax limit, the more your Social Security tax savings.
However, the Social Security tax limit increases yearly as the national average wage index increases. When that happens, more income is subject to the Social Security tax.
Note: Some people don’t have to pay Social Security taxes. (Exemptions from Social Security taxes may be available if certain requirements are met.)
Also, self-employed individuals pay the full 12.4% rate. However, if you're self-employed, you can deduct the employer-equivalent portion of that amount.
Medicare tax rate 2025 and 2026
It’s also worth noting that, unlike Social Security, the Medicare tax has no income cap.
The standard Medicare tax rate of 1.45% (paid by the employee, 2.9% total when added to the employer portion) applies to all earnings, regardless of income level.
High-income earners can be subject to an additional Medicare surtax of 0.9%. This applies to those with income above $200,000 for single filers or $250,000 for married couples filing jointly.
Self-employed individuals pay the employee and employer portions of Medicare tax but can claim a self-employment tax deduction. The 0.9% on high incomes may apply.
Social Security COLA 2026
Along with the wage tax base rate, the SSA announced the 2026 COLA increase, which is 2.8%.
On average, according to the SSA, Social Security retirement monthly benefits for an "average retiree" are expected to grow by about $57 as of January 2026.
For more information, see Kiplinger's report: The Social Security COLA for 2026: What You Need to Know.
Will the Social Security tax limit be eliminated soon?
As Social Security faces mounting long-term funding pressures, some lawmakers and policy groups are reviving calls to scrap the SS payroll tax income cap.
Removing the Social Security tax wage base/limit would mean high earners pay the 6.2% Social Security tax on all their income, not just earnings below the annual limit.
Right now, some wealthy taxpayers in the U.S. reach the wage limit quickly. For instance, someone earning $2 million a year would surpass the 2025 wage base of $176,100 in less than five traditional work days.
After that point, they no longer pay Social Security tax for the rest of the year, while middle-income workers continue contributing on every paycheck.
- Supporters contend that eliminating the cap would inject new revenue into the Social Security trust fund and make the tax system fairer by ensuring everyone contributes the same share of their pay.
- Some say scrapping the cap would also bring Social Security taxation in line with the Medicare tax, which has no earnings limit.
- But opponents argue that lifting the limit would amount to a tax increase on upper-income workers and small business owners.
Additionally, some point out that while high-income individuals might pay more in taxes, the current Social Security benefit calculation formula could result in them eventually receiving higher benefits in retirement. (That could further strain the system.)
For now, the limit remains in place, but continues to rise each year. So, if you're a high earner, plan accordingly or consult a tax professional to see how this shift might impact your bottom line.
Related
-
Quiz: How Well Do You Understand the Social Security Earnings Test?Quiz Test your basic knowledge of the Social Security earnings test in our quick quiz.
-
The 'Go Live Your Life' Rule of Retirement SpendingThe 'guardrails approach' to retirement spending signals when you can spend more and when you need to rein it in, giving you greater flexibility in your post-work life.
-
I Retired at 65 With $7.8 Million and Feel Like I Over-Saved. My 40-Something Son Is on the Same Path. Should I Tell Him to Reconsider?We ask financial experts for advice.
-
I'm a Financial Pro: This Is How You Can Guide Your Heirs Through the Great Wealth TransferFocus on creating a clear estate plan, communicating your wishes early to avoid family conflict, leaving an ethical will with your values and wisdom and preparing them practically and emotionally.
-
To Reap the Full Benefits of Tax-Loss Harvesting, Consider This Investment Strategist's StepsTax-loss harvesting can offer more advantages for investors than tax relief. Over the long term, it can potentially help you maintain a robust portfolio and build wealth.
-
Child-Free Cruises Perfect For Your Retirement CelebrationHow to find a bespoke ocean or river vacation for adults. Many of these options are smaller, charming river cruises, expeditions, or niche experiences.
-
Social Security Wisdom From a Financial Adviser Receiving Benefits HimselfYou don't know what you don't know, and with Social Security, that can be a costly problem for retirees — one that can last a lifetime.
-
Take It From a Tax Expert: The True Measure of Your Retirement Readiness Isn't the Size of Your Nest EggA sizable nest egg is a good start, but your plan should include two to five years of basic expenses in conservative, liquid accounts as a buffer against market volatility, inflation and taxes.
-
Backdoor Roth IRAs: Help Your Kids Keep More of Their InheritanceConverting to a backdoor Roth IRA via an IRS "loophole" is an estate planning tool that gives heirs tax-free income in retirement. It can help you, too.
-
New Opportunity Zone Rules Triple Tax Benefits for Rural Investments: Here's Your 2027 StrategyNew IRS guidance just reshaped the opportunity zone landscape for 2027. Here's what high-net-worth investors need to know about the enhanced rural benefits.
