Have you heard the news of an increase in Social Security taxes? According to recent rumors, in 2024, these taxes are likely to be increased to 17.5%, which is 12.4% at present. But there is still no official confirmation for the same. Social media anchors and various online social news platforms are concerned about this potential increase in the Social Security tax. Many employees and self-employed individuals are also concerned about these deductions.
In this article, we will check the facts of how real this news is and how much not, and clarify the situation by understanding the claims related to the news. We will know the real facts surrounding these rumors by discussing the possible changes in Social Security Taxes. We’ll let you know if this news is correct then how it will impact your pocket directly or indirectly.
17.5% Social Security Tax Potential Impact
Before knowing the changes in the rate of Social Security Taxes, it is important to understand what it is and how it works. Social Security Taxes are the type of payroll taxes that are contributed by both employers and employees and self-employed individuals. This tax is collected by the US government to provide funds to retired employees, disabled people, and survivors of departed workers.
Who Pays the Social Security Tax in the US?
Social Security tax is paid by employees, employers, and self-employed individuals. At present in 2023-24, the tax rate for employees is 6.2%; employers contribute the same 6.2% and make the total tax rate of 12.4%. Additionally, self-employed individuals pay the entire 12.4% themselves.
Social Security Earning Limits Changes
SSDI Checks Will Also Increase
| Tax Payers’ Type | Tax Rates |
| Employees | 6.2%(matches the employer’s contribution) |
| Employers | 6.2%(matches the employee’s contribution) |
| Self-employed | 12.4%(Covers both employee and employer Contribution) |
Current Social Security Tax Rates: 2023-24
| Year | Tax Rates | Maximum Taxable Earnings |
| 2023 | 12.4% | $160,200 |
| 2024 | 12.4% | $168,600 |
The current Social Security tax rate is 12.4%, however, it is anticipated that this rate will not be sufficient to maintain the Social Security system in the long run. The causes of the hike include longer life expectancies, higher inflation rates, and a growth in the number of retirees. Given this worry, a potential increase is a possibility that cannot be completely ruled out from the mind.
Why Are There Chances of a 17.5% Increase?
Several factors may contribute to the key reasons for a possible hike in tax rates of Social Security Taxes:
- Growing Aging People
The younger and active population, who are the tax payers are retiring and the aging persons who are beneficiaries are increasing at the same time. More people, who are funding the Social Security system are drawing while the people who are taking the benefits of the Social Security funds are increasing that’s why it becomes important to balance the situation. This might be considered as one of the significant reasons.
- Longer Life Expectancy
In the USA people are living longer and the expectancy of living is growing which means more and more people are being eligible to get Social Security benefits—collecting more funds, and less are paying for the system. This leads to the pressure on the system of the payees to continue payments over more years.
- Inflation Cost-of-Living Adjustments
Social Security benefits are adjusted yearly to account for inflation. The amount that the beneficiary receives will be increased by 3.2% as a Cost of Living Adjustment (COLA) in 2024, to continue the system.
- Revenue Shortfalls
Without these adjustments, the Social Security Funds might face revenue shortfalls in the upcoming 5-10 years. So it becomes necessary to either increase tax or benefit cut.
- Financial Factors
With the changing employment patterns and growing Gig economy jobs like freelancing, and part-time jobs, have also limited the funding for the revenue for the Social Security System. Due to this Social Security system is facing challenges in generating revenue for the system.
Will Really Social Security Tax Hike to 17.5%?: FACT
There is still no official notice from the US government for the confirmation of new rates for Social Security Tax. According to Social Security trustees, adjustments may be required to maintain the program in the future. There are no amendments in formal policy.
According to the officials, the current rate will remain at 12.4% and the figure of 17.5% has arisen in the context of the long-term reform. If you are still concerned about the Social Security Tax rates it is better to stay informed from the official website of the Social Security Administration or must consult with your financial advisors.
Financial Effects of a 17.5% Social Security Tax Increase
If the Social Security Tax were to hike to 17.5% in the future, it would impact the employees, employers, and self-employees as well. It will increase the amount paid by them.
For
For instance, for people with an income level of $50,000, the current tax paid amount, according to 12.4% is $6,200, but at new rates of 17.5%, it would be $8,750, adding the difference of $2,550. For higher-income level people of $168,600, the increase would be $8,608.20 yearly.
See in the table below how it will generate the difference in the final paid amount.
| Income Cap | At Present Tax Rate(12.4%) | At Expected Rate(17.5%) | Differences |
| $50,000 | $6,200 | $8,750 | Plus $2550 |
| $100,000 | $12,400 | $17,500 | Plus $5100 |
| $168,600 | $20,896.80 | $29,505 | Plus $8,608.20 |
Wrapping up
Concludingly, the Social Security tax rate will remain the same at 12.4% because there is no notice or official statement by the authorities to increase it to 17.5%. The ongoing debates about raising the tax rate are caused by concerns over the future sustainability of the system.
| Home Page | https://www.easthamptonchamber.com/ |
Multiple factors impact the tax rates such as the aging population, longer life expectations, and rising benefit costs. It will remain a subject of speculation at this point. As of now, taxpayers have to pay tax on the current rates, but future adjustments are essential to ensure that the Social Security system continues to benefit the beneficiaries.
FAQs For 17.5% Social Security Tax Potential Impact
Not at all, there is no official notification of a tax rate for increasing it to 17.5%. The rate remains the same which is 12.4%.
This tax is collected in the USA to cover the Social Security system. If you are an employee, your employer deducts this tax even if you do not qualify for Social Security benefits.
Riya Claire is the Editor-in-Chief of the East Hampton Chamber Portal. She holds a degree in Mass Communication, an MBA in Finance, and a diploma in HR, making her a versatile professional for an online portal