The Social Security Administration has announced the changes for the 2025 year in the social security benefit payments as well as in the taxable earnings. The administration has increased the income limit for 2025 based on inflation.
The working class of America pays the Social Security or payroll tax so that later they can receive retirement benefits under Social Security. People who pay Social Security tax should know the 2025 change to plan their contributions.
Max Social Security Tax 2025
Social Security gets funded through the payroll taxes that allow employers and employees to contribute to secure retirement. The taxes have been collected under the Social Security Act since 1937 when in the same year administration made the first payment.
The administration sets the income limit each year based on inflation so that it ensures people don’t have any financial pressure due to the payroll taxes. It is also called Old Age, Survivors, and Disability Insurance Taxes (OASDI), here taxes are cut through your paycheck.
The administration has announced the 2025 Social Security changes, where the administration has set the maximum taxable earning for Social Security tax as $176,1000 for 2025 increasing from the 2024 earning of $168,800.
So, people who earn below the income limit would be exempted from paying the Social Security taxes and people who earn equal to the set limit ot above it would pay maximum taxes up to $10918.20
Social Security Tax Rate 2025
As per the Social Security tax rate, the administration has kept the rate unchanged, it is the same as 6.2%. The rate will be the same for employees and employers, that is, 6.2% for each, whereas the self-employed people the rate will be 12.4% as they have to pay for both employees and employer.
The Social Security tax rate combined with Medicare is 7.65%, where 1.45% is the medicare portion and the rest is OASDI. As per the Social Security tax rules, the employees and employers contribute to the Social Security fund equally.
The employers deduct the social security taxes from the employee’s paycheck based on the income and rate. The maximum contribution of $10,918.20 is based on the 6.2% rate, which you will get when you apply the rate on maximum taxable earnings, which is $176,1000 x 6.2%.
The tax rate has been the same for many years, however, the contribution and benefit base are adjusted each year.
Who are exempted from the Social Security Taxes?
Under the Social Security tax system, almost all the US working people who meet the income limit pay the payroll taxes, however, there are some people or organizations that make them exempted from Social Security taxes:
- Self-employed individuals whose earnings are less than $400 will not pay social security taxes;
- Foreign non-resident students who are temporarily living in the United States in M-1, F-1, or J-1 status for less than 5 years are exempted from social security taxes.
- The resident alien foreign students with M-1, F-1, or J-1 non-immigrant status living in the US for more than 5 years will be subjected to paying taxes if they meet the Substantial Presence test, however, they can be exempted if they meet the student FICA exemption under the FICA.
- The religious organization is exempted from paying social security taxes. The organizations should have waived their benefits and rights and also must be members of religious sects.
- Foreigners who work in the US for foreign governments, such as diplomats, officials counselors, and others are exempted from the Social Security tax.
- The US state and local government employees whose retirement is covered in the public retirement plan do not have to finance Social Security through payroll taxes.
- The government allows exemption to the following non-residents to avoid double taxation:
- H-Visa holders
- Researcher and Academic worker working in the country with M-Visa, J-Visa, F-Visa, and Q-Visa;
- D-Visas who do not work in the US or work for some foreign employer as a crew member for a ship or aircraft,
- A-Visas holders or other country government employees working in the US;
- People working for foreign organizations with G-Visa.
How can you apply for Social Security Tax exemptions?
If you meet the above Social Security tax exemptions, you can apply for the tax exemption status on the IRS official website. The IRS regularly approves approval for eligible people from payroll taxes by submitting a certain form to the agency.
The IRS Form 4029 is the form to apply for the waiver of benefits and Social Security tax exemption. The eligible people must file the exemption application on or before the deadline to pay taxes for the taxable year, where they are self-employed or meet other conditions.
Once the IRS grants the Social Security tax exemption status, the exemption is until you are a member of a religious group or meet the other conditions. The individuals should know the Social Security benefits will be only payable for the year they have paid the Social Security taxes.
How many years you should pay the Social Security taxes to receive the benefits?
Under the Social Security system, Americans who paid the Social Security taxes and earned 40 credits would be eligible to receive retirement benefits and reach the pension age. To earn at least 40 credits, you must pay at least social security taxes for a minimum of 10 years.
If you stop working at any time or you have a lower income the credit will remain intact and you can continue when you pay taxes after some time, so there is no need to pay continuous taxes.
The Social Security tax limit for 2025 has increased now some people will be exempted from the taxes, but paying the Social Security taxes ensures you get the benefits under the SS in the future.