"Social Security is primarily funded through payroll taxes. If you notice a line item on your pay stub for FICA, that reflects money that's being withheld to make Social Security can continue to pay benefits. All workers are required to pay a 12.4% tax rate on their wages toward Social Security. But if you're employed by a company, you'll split that obligation with them and only pay 6.2% yourself."
"Once your income exceeds what's known as the Social Security wage cap, you don't have to continue paying those taxes. You still have to pay federal taxes on your extra income, and, where applicable, state taxes. But once you've hit the wage cap, you're off the hook as far as Social Security is concerned. In January, the Social Security wage cap was adjusted upward to account for changes in wage growth on a national scale."
Social Security rules can change yearly, and the taxable wage cap increased in January 2026. Payroll taxes fund Social Security through a 12.4% tax on wages, typically split between employer and employee so individuals pay 6.2%. The Social Security tax applies only up to a wage cap; earnings above that cap are not subject to the Social Security portion of payroll taxes, though federal and applicable state taxes still apply. The wage cap rose from $176,100 in 2025 to $184,500 in 2026. Higher earners will therefore pay Social Security taxes on a larger portion of their wages, increasing annual tax responsibility.
Read at 24/7 Wall St.
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