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The Social Security Administration has announced changes for 2025 in the payment of social benefits as well as in taxable income. The administration increased the income limit for 2025 based on inflation.
America’s working class pays Social Security or payroll taxes so they can later receive Social Security retirement benefits. People who pay Social Security taxes should know the change in 2025 in order to plan their contributions.
Maximum tax on social security in 2025
Social security is financed through payroll taxes that allow employers and employees to contribute to a secure retirement. Taxes have been collected under the Social Security Act since 1937, when the administration made the first payment in the same year.
The administration sets an income cap each year based on inflation to ensure that people don’t have any financial strain from payroll taxes. Also called the Old Age Insurance, Survivors and Disability Insurance (OASDI) tax, this is where taxes are deducted from your paycheck.
The administration announced Social Security changes for 2025, where the administration set the maximum taxable earnings for Social Security tax at $176,1000 for 2025, increasing from 2024 earnings of $168,800.
So, people earning below the income limit would be exempt from paying Social Security taxes, and people earning equal to the set limit above it would pay maximum taxes of up to $10,918.20
Social security tax rate in 2025
As for the social security tax rate, the administration kept the rate unchanged at 6.2%. The rate will be the same for employees and employers, i.e. 6.2 percent for each, while for the self-employed it will be 12.4 percent because they have to pay for both the employees and the employer.
The Social Security tax rate combined with Medicare is 7.65%, where 1.45% is the Medicare portion and the rest is OASDI. According to the social security tax rules, employees and employers contribute equally to the social security fund.
Employers deduct Social Security taxes from employees’ wages based on income and rate. The maximum contribution of $10,918.20 is based on the 6.2% rate you will get when you apply the rate to your maximum taxable earnings, which is $176,1000 x 6.2%.
The tax rate has been the same for many years, but the contribution base and benefits are adjusted every year.
Who is exempt from social security tax?
Under the Social Security tax system, almost all US workers who meet the income limit pay payroll taxes, however, there are some people or organizations that exempt them from Social Security taxes:
- Self-employed individuals whose earnings are less than $400 will not pay Social Security taxes;
- Nonresident foreign students who temporarily reside in the United States in M-1, F-1, or J-1 status for less than 5 years are exempt from Social Security taxes.
- Resident foreign students with M-1, F-1, or J-1 nonimmigrant status who have lived in the US for more than 5 years are subject to tax if they meet the substantial presence test, however, they may be exempt if they meet the student FICA exemption under FICA .
- A religious organization is exempt from social security tax. Organizations were supposed to renounce their privileges and rights, and they also had to be members of religious sects.
- Foreign nationals who work in the US for foreign governments, such as diplomats, official advisers and others, are exempt from Social Security taxes.
- US state and local government employees whose pensions are covered by a public pension plan do not have to fund Social Security through payroll taxes.
- The government allows exemptions for the following non-residents to avoid double taxation:
- H-Visa holders
- Researcher and academic staff 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 a foreign employer as a ship or aircraft crew member,
- A-visa holders or government employees of another country working in the US;
- People who work for foreign organizations with a G-Visa.
How can you apply for a Social Security tax exemption?
If you meet the Social Security tax exemptions listed above, you can apply for tax exempt status on the official IRS website. The tax administration regularly grants approval for people who meet the requirements of payroll tax by submitting a specific form to the agency.
IRS Form 4029 is a form for filing a claim for waiver of benefits and exemption from Social Security tax. Eligible individuals must apply for an exemption on or before the tax due date for the tax year if they are self-employed or meet other requirements.
Once the IRS approves Social Security tax-exempt status, the exemption is valid until you become a member of a religious group or meet other requirements. Individuals should know that Social Security benefits will only be paid for the year in which they paid Social Security taxes.
How many years do you need to pay Social Security taxes to receive benefits?
Under the Social Security system, Americans who paid Social Security taxes and earned 40 credits would be eligible to receive a pension and reach retirement age. To earn at least 40 credits, you must pay minimum Social Security taxes for at least 10 years.
If you stop working at any time or 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 taxes continuously.
The Social Security tax cap for 2025 has gone up now, and some people will be exempt, but paying Social Security taxes ensures that you’ll get SS benefits in the future.
