Taxable Wage Base
Candlefocus EditorThe taxable wage base is an important concept used to determine the amount of taxable income that employees must pay Social Security taxes on. This important calculation is also known as the Social Security wage base and is determined annually by the federal government. In 2022, the maximum amount of income that taxpayers must pay Social Security tax on is $147,000 and in 2023, this number increased to $160,200.
Half of the Social Security tax is paid by the employer, while the other half is paid by the employee. It is important to remember that the income upon which the taxation is calculated is based on a percentage of the employees paycheck, rather than a flat rate. This means that the percentage paid on each paycheck, and the amount of Social Security taxes paid, will vary according to the wage base.
The taxable wage base is also used by state unemployment agencies in order to calculate unemployment taxes. The state or federal taxation laws in your state will dictate how much one has to pay based on the taxable wage base you are subject to.
Overall, the taxable wage base is an important calculation to consider when filing and paying taxes. By understanding your own taxable wage base, you can better plan for how much taxes you will need to pay for each paycheck. Knowing your own Social Security wage base is essential to filing your taxes accurately and legally each year.