On October 13, 2022, the Social Security Administration announced the 2023 wage cap for purposes of the Social Security tax. For 2023, the Social Security wage cap will be $160,200. This is an increase from the 2022 wage cap of $147,000. As most taxpayers know, the Federal Insurance Contributions Act (FICA) tax on wages is 7.65 percent each for the employee and the employer. The FICA tax has two components:
A 6.2 percent Social Security tax, and
A 1.45 percent Medicare tax, also known as hospital insurance (HI).
For self-employed workers, the self-employment tax is 15.3 percent, consisting of:
A 12.4 percent Social Security tax, and
A 2.9 percent Medicare tax.
The Social Security tax applies only up to the wage cap. There is no wage cap for HI tax.