Social Security Gets 2024 Wage Base Boost

The Internal Revenue Service has announced an increase in the Social Security wage base to $168,600, up from $160,000.

The Social Security wage base — the amount of worker pay that is subject to a Social Security payroll tax — is adjusted each year based the national average wage index. The tax rate is 12.4%, split evenly between employer and employee.

As the IRS explains in Publication 15, only the Social Security tax has a wage base limit. All covered earnings are subject to a Medicare payroll tax at a rate of 2.9%, split evenly between employer and employee.

Both payroll tax rates are unchanged from 2022. Self-employed individuals pay both shares of the taxes.

“Considering the wage base had a big increase in 2022 and, now again in 2023, we are paying Social Security taxes on a larger amount of our earnings,” Jeff Bush of The Washington Update told ThinkAdvisor on Monday. “Effectively, a tax increase.”

But Maria Freese, senior legislative representative at National Committee to Preserve Social Security and Medicare, which supports raising the Social Security tax cap, called the $8,000 increase in wages subject to the tax ”not a particularly significant number.”

The increase is unlikely to have a significant impact on the solvency of the Social Security trust fund because beneficiaries have also received a cost-of-living adjustment due to rising prices.

In years with stagnant wages, the wage base “has barely increased,” Freese said. In 2023, “it went up $13,200 because wages went up as employers tried to attract labor in a tight market.”

Historically, Freese added, “prices have risen faster than wages on average, but not necessarily in a tight job market.”