Financial Literacy

Understanding the FICA Tax Wage Base Limit

While Social Security taxes are a flat percentage of your paycheck, they are only levied on earnings up to a specific annual limit, known as the Social Security Wage Base. Once your cumulative earnings for the calendar year surpass this threshold, you no longer pay the 6.2% Social Security portion of FICA taxes, resulting in a noticeable increase in take-home pay for high earners toward the end of the year. It is important to note that the 1.45% Medicare tax portion of FICA does not have this limit and continues to apply to all wages earned regardless of the total amount.

Source: Social Security Administration