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Social Security Maximum Withholding UPDATED Through 2019

Information for Businesses

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The Social Security Administration has announced the 2019 Social Security benefit amounts and the maximum withholding change for the 2019 tax year. The maximum withholding amount is adjusted each year by a formula based on cost of living increases. The 2019 increase is larger than larger than in the past few years because the Cost of Living Increase for Social Security recipients increased, to 2.8 percent.

For 2018 Payroll Taxes

The maximum taxable earnings for Social Security withholding for 2018 are $128,400. Medicare withholding has no maximum.

What Is Social Security Withholding?

The Social Security tax is a federal tax imposed on employers, employees and self-employed individuals. It is used to pay the cost of benefits for elderly recipients, survivors of recipients, and disabled individuals (OASDI Insurance).

Social Security tax is one of the payroll taxes paid by employees, employers, and self-employed individuals each year. The Social Security withholding rate is set using a formula based on inflation.

The Social Security tax rate is 12.4 percent; 6.2 percent is withheld from each of the employer and employee. The full 12.4 percent is paid by self-employed individuals. The Medicare withholding and employer-paid amounts are added to the Social Security rate to get what's called FICA taxes. The Medicare rates are 1.45% each, for a total of 2.9%. So the total FICA tax amount is 15.3%. 

Benefit vs. Withholding

Sometimes people get the maximum Social Security benefit and the maximum Social Security withholding confused. Simply stated, the benefit is received by those eligible for these benefits, while the withholding is taken from the pay of workers in the U.S.

The maximum benefit is the highest amount someone can receive as a Social Security benefit each month. This benefit is based on age at retirement and past earnings. For someone retiring at full retirement age in 2019, the maximum benefit at $2,861, with lower amounts for people retiring at less than the full retirement age. 

The maximum withholding is the most that can be taken from an employee's pay for the OASDI (Social Security) fund. 

What are the Current and Past Social Security Maximums?

Social Security taxes are withheld up to a maximum amount, which changes each year. Here are the maximum wages subject to Social Security for the past few years:

  • 2019 $132,900
  • 2018 $128,400
  • 2017 $127,200
  • 2016 $118,500 
  • 2015 $118,500
  • 2014 $117,000
  • 2013 $113,700
  • 2012 $110,100
  • 2011 $106,800
  • 2010 $106,800
  • 2009 $106,800
  • 2008 $102,000

The maximum OASDI (Social Security) tax payable by an employee in 2019 would be $8239.80 ($132,900 x 6.2%). There is no maximum Social Security tax payable by an employer. 

Social Security Tax vs. FICA Tax 

The term "Social Security tax" or "OASDI" is often confused with "FICA taxes," which include both Social Security and Medicare taxes.

What is the Medicare Tax?

The Medicare tax rate is 1.45 percent for both employers and employees, with the self-employed Medicare rate at 3.3 percent. There is no limit on Medicare taxes; Medicare tax is payable on all income, without a maximum. For higher-income individuals, there is an additional Medicare tax of 0.9% on income over a specific maximum, depending on the individual's tax filing status.

Self-Employment Tax and Social Security Tax

Income from both self-employment and from employment (wages and tips) are included in income for the Social Security maximum. The total self-employment tax rate is 15.3% of the net profit of the company owned by the individual, with the Social Security portion at 12.4% of that total. 

How Self-Employment Tax Affects the Social Security Maximum

If your only income is from self-employment, the social security maximum is still in effect. That is, the Social Security portion of your self-employment tax is capped at the maximum profit of the company, depending on the maximum for that year. For example, if you have only self-employment, and the net earnings on your Schedule C are $135,000 for 2019, you would only be taxed for self-employment tax on the 2019 maximum of $132,900. 

If an individual has income from both employment and self-employment, the employment income is considered first for social security purposes. If the maximum is not reached, then self-employment income is also considered, up to the amount of the maximum. This article on Income from Employment and Self-employment might help clear up some of the confusion.

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