Social Security taxes could rise for millions of Americans

Many Americans may not be aware, but the year 2025 could bring a big increase in Social Security taxes.

Millions of people are likely to see their taxes increase as the maximum taxable income limit is set to change in mid-October for 2025. Social Security updates the limit based on the average wage index, and the Social Security Administration Board has predicted that The taxable maximum will go to $174,900 next year, up from $168,600 this year.

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This could increase workers’ Social Security taxes by $391. Since the tax rate is set at 6.2 percent, those with incomes above $174,900 will see $10,844 withheld from their paychecks. This year, that same worker would see a $10,453 withholding.

While higher-income working Americans may not be happy about the increase, seniors are likely to benefit. The Social Security Administration Board predicts that by the mid-2030s, Social Security funds will become insolvent, and a cut of about 20 percent would hit all retirees depending on income.

“While no one wants to pay more taxes, the unfortunate reality is to keep Social Security sustainable as a long-term program, increases like what will probably happen in 2025 are necessary,” Alex Beene, a financial education instructor. at the University of Tennessee at Martin, said Newsweek.

“If anything, the amount is more likely still too low to keep up with the eventual gaps in funding the program will have over the coming decades.”

With that in mind, Beene said there are likely to be more proposals to increase or even eliminate the maximum taxable amount of Social Security.

“Increasing the taxable maximum would definitely lead to a better-funded program that could last longer in solvency than current projections indicate,” Beene said.

However, he said the passage of any such law would likely take a while as lawmakers try to prevent tax increases, even on high-income earners.

“Typical arguments are that more taxation of any kind on higher-income individuals could adversely affect other classes of investment, including businesses that provide jobs and benefits to others,” Beene said.

“But when considering the negative impacts, it’s also more than fair to consider the millions of Americans who would be devastatingly affected if Social Security were to undergo significant cuts to exist.”

The amount of Social Security payments will also change next year based on the cost-of-living adjustment, which won’t be released until consumer price index data is released in October.

The Senior Citizen League previously projected that benefits would increase by 2.7 percent, which would lead to an increase of about $51. If so, the average benefit amount will increase to $1,967 per month.