In 2023, Social Security beneficiaries will see a historic 8.7% increase in their Social Security check due to a cost of living adjustment (COLA). Due to this bump-up in the National Average Wage Index, the maximum taxable earnings cap has risen from $147,000 to to $160,200. Employees whose compensation exceeds the current 2022 taxable earnings cap of $147,000 may notice a slight decrease in net take-home pay due to the payroll tax adjustment. The increase in the Social Security taxable wage base might be impacted by the increase in the tax brackets. Due to this complexity, experts advise employers to refer employees with detailed questions to consult with their own tax advisors.
Approximately 90% of the more than $1 trillion in revenue collected by Social Security every year comes from the 12.4% payroll tax on earned income from wages and salaries.