Social Security Wage Base Increases to $160,200 in 2023

​Mallory Vincent, CPA •

​The Social Security Administration (SSA) has announced that the maximum earnings subject to Social Security (OASDI) tax will increase from $147,000 to $160,200 in 2023. The maximum Social Security employer contribution will increase $818.40 in 2023. These changes reflect cost-of-living adjustments (COLA) to account for inflation.
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​For 2023, the Federal Insurance Contributions Act (FICA) tax rate for both employers and employees is 7.65% (6.2% for Social Security tax and 1.45% for Medicare tax). 
For 2023, an employer must withhold: 

1. 6.2% Social Security tax on the first $160,200 of employee wages (maximum tax is $9,932.40; i.e., 6.20% × $160,200)*, plus; 
2. 1.45% Medicare tax on the first $200,000 of employee wages, plus; 
3. 2.35% Medicare tax (regular 1.45% Medicare tax + 0.9% additional Medicare tax) on all employee wages in excess of $200,000. 

*Note that for (a) above, a self-employed worker will pay a total of $19,864.80 in social security tax ($160,200 × 12.4%).
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In addition, Social Security and Supplemental Security Income (SSI) benefits will increase by 8.7% in 2023.
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Lastly, the retirement earnings test remains in effect for individuals below normal retirement age (age 65 to 67, depending on year of birth) who continue to work while collecting Social Security benefits. For affected individuals, $1 in benefits will be withheld for every $2 in earnings above $21,240 in 2023 (up from $19,560 in 2022). For working individuals collecting benefits who reach normal retirement age (NRA) in 2023, $1 in benefits will be withheld for every $3 in earnings above $56,520 (up from $51,960 in 2022), until the month that the individual reaches NRA. After that month, there is no limit on earnings.
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The SSA has a 2023 Fact Sheet on the changes.