Wage cap 2022 rises to $147,000 for Social Security payroll taxes – Community News
Social Security

Wage cap 2022 rises to $147,000 for Social Security payroll taxes

From January 1, 2022, the maximum income subject to Social Security tax will be increased by $4,200 to
$147,000— up from the $142,800 maximum for 2021, the Social Security Administration (SSA) announced Oct. 13. The SSA also posted a fact sheet summarizing the changes in 2022.

The taxable wage cap is automatically adjusted each year based on increases in the national average wage index (not inflation), calculated annually by the SSA.


Payroll taxes: limit on maximum income


Type of payroll tax


2022 Maximum profit


2021 Maximum profit

Social Security

$147,000

$142,800

Medicare

No limit

No limit

Source: Social Security Administration.

The growth of the Social Security pay cap from $127,200 in 2017 to 147,000 in 2022 represents an increase of more than 15.5 percent over the past five years.

However, the $4,200 increase for 2022 is smaller than the $5,100 increase in 2021, up from the $137,700 high for 2020, due to restrictions on wage growth during the height of the COVID-19 pandemic.

Inflation affects benefits

Meanwhile, monthly Social Security and supplemental income benefits for more than 64 million people in the U.S. will increase 5.9 percent by 2022 — the largest cost of living (COLA) adjustment since the 1980s — the SSA also announced, as a result of the inflation peak. The adjustment increases the average monthly retirement benefit by $92 to about $1,657.

The Senior Citizens League, an advocacy group, called the benefit increase “the highest COLA most beneficiaries today have ever seen,” but added that “a high COLA means exceptionally high inflation impacts consumers. “

FICA Rates

Social Security and Medicare payroll taxes are collected together as the Federal Insurance Contributions Act (FICA) tax. FICA tax rates are set by law and can only be changed through new tax laws.

Social Security is funded by a 12.4 percent payroll tax on wages up to the taxable income ceiling, with half (6.2 percent) being paid by employees and the other half being paid by employers. Self-employed people pay the full 12.4 percent.

For employers and employees, the Medicare payroll tax rate is equal to 1.45 percent on all income (the self-employed pay the full 2.9 percent), bringing the total Social Security and Medicare withholding rate for employers and employees to 7.65 percent — with only the part of the social security limited to the maximum taxable amount.

FICA rate (Social Security + Medicare withholding)
Collaborator 7.65%
(6.2% + 1.45%)
​Employer ​7.65%
(6.2% + 1.45%)
Entrepreneur 15.3%
(12.4% + 2.9%)
Note: for salaried employees, their share of social security is 6.2% of the wages up to the taxable maximum. Their Medicare portion is 1.45% on all income.

The payroll tax rates shown above do not include an additional 0.9 percent of Medicare taxes paid by highly compensated employees on income that exceeds the threshold amounts based on their filing status:

  • $250,000 for married taxpayers filing joint returns.
  • $125,000 for married taxpayers filing separately.
  • $200,000 for single and all other taxpayers.

These legally established wage thresholds do not adjust for inflation and therefore apply to more employees per year.

Employers must withhold the additional Medicare tax from the wages of employees who earn more than $200,000 in a calendar year.

Adjust systems, inform employees

Workers whose compensation exceeds the current taxable income cap of $142,800 for 2021 may notice a slight drop in net pay home from January next year due to the payroll tax adjustment.

At the start of the new year, U.S. employers must:

  • Adjust their payroll systems to account for the higher taxable wage base under the Social Security payroll tax.
  • Notify affected employees that a larger portion of their wages will be withheld from the payroll.

Social Security Income Test COLA

Workers can start collecting Social Security retirement benefits as early as age 62, but their monthly payment will be lower than if they wait until their normal retirement age — 66 for people born 1943 to 1954, for example.

The full retirement age will be raised to 66 and 4 months in 2022 for people born in 1956.

Those who received Social Security before full retirement age but continue to earn income will have their monthly benefits reduced if their income exceeds an annually adjusted income test limit. The SSA has announced that:

  • For those receiving benefits before full retirement age in 2022, the SSA deducts $1 from their monthly benefits for every $2 earned over $19,560 per year (or $1,630 per month) — up from $18,960 per year (or $1,580 per month) in 2021.
  • For those reaching full retirement age in 2022, the SSA will deduct $1 from their monthly benefits for every $3 earned over $51,960 per year (or $4,330 per month) until the month the employee reaches full retirement age — an increase of $50,520 per year (or $ 4,210 per month) in 2021.

There is no limit on income under this test for employees who have reached or exceeded their full retirement age for the entire year.

[Update]

Income tax brackets 2022

The IRS has issued income tax adjustments for tax year 2022 in the 2021-45 tax proceeding, released on November 10, 2021.

“As a result of consumer price increases, all tax bracket thresholds and other key tax code parameters are rising faster than normal,” The Wall Street Journal reported on Nov. 11. The changes “affect payroll deductions and quarterly estimated taxes in 2022 and will be reflected in tax returns filed in early 2023.”

The level of income that falls under a higher tax bracket can influence a number of employee decisions, including how much salary to defer to a traditional 401(k) plan or to an HSA, reducing taxable income for a given year with the contributed amount, or to participate in an unqualified deferred income plan, if that option is available through the employer.

The following is a comparison of the income tax rates and ranges for 2021 and 2022. The 2022 rates are in effect January 1, and will remain in effect until 2022, unless Congress passes new tax laws.

Single Submission Individual Returns (other than surviving spouses and heads of household)

Tax rate 2021 Taxable income 2022 Taxable income
10% $0 to $9,950 $0 to $10,275
12% Over $9,500 to $40,525 Over $10,275 to $41,775
22% Over $40,525 to $86,375 Over $41,775 to $89,075
24% Over $86,375 to $164,925 Over $89,075 to $170,050
32% Over $164,925 to $209,425 Over $170,050 to $215,950
35% Over $209,425 to $523,600 Over $215,950 to $539,900
37% Over $523,600 Over $539,900

Married filing jointly (and surviving spouse)

Tax rate 2021 Taxable income 2022 Taxable income
10% $0 to $19,900 $0 to $20,550
12% Over $19,900 to $81,050 Over $20,550 to $83,550
22% Over $81,050 to $172,750 Over $83,550 to $178,150
24% Over $172,750 to $329,850 Over $178,150 to $340,100
32% Over $329,850 to $418,850 Over $340,100 to $431,900
35% Over $418,850 to $628,300 Over $431,900 to $647,850
37% Over $628,300 Over $647.850

Married Submit a separate declaration

Tax rate 2021 Taxable income 2022 Taxable income
10% $0 to $9,950 $0 to $10,275
12% Over $9,950 to $40,525 Over $10,275 to $41,775
22% Over $40,525 to $86,375 Over $41,775 to $89,075
24% Over $86,375 to $164,925 Over $89,075 to $170,050
32% Over $164,925 to $209,425 Over $170,050 to $215,950
35% Over $209,425 to $314,150 Over $215,950 to $323,925
37% Over $314,150 Over $323,925

Heads of Households

Tax rate 2021 Taxable income 2022 Taxable income
10% $0 to $14,200 $0 to $14,650
12% Over $14,200 to $54,200 Over $14,650 to $55,900
22% Over $54,200 to $86,350 Over $55,900 to $89,050
24% Over $86,350 to $164,900 Over $89,050 to $170,050
32% Over $164,900 to $209,400 Over $170,050 to $215,950
35% Over $209,400 to $523,600 Over $215,950 to $539,900
37% Over $523,600 Over $539,900

The 2021-45 Income Scheme also states that, among other things, income tax adjustments for 2022:

  • The standard deduction for single taxpayers and for married taxpayers filing separately increases by $400 to
    $12,950, up $12,550.
  • The standard deduction for married taxpayers filing joint returns increases by $800 to
    $25,900, up from $25,100.
  • The standard deduction for heads of household increases by $600 to
    $19,400, up from $18,800.


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