17.5% – The New Social Security Tax, Is it True? Check the Increase from 12.4% to 17.5%

New Social Security Tax [17.5%]: Have you heard that the Social Security tax may increase to 17.5% in 2024? You might have been a little shocked to hear this, but there is nothing to worry about! Today we will discuss whether there is really going to be such a big increase in this Social Security Tax or is it just a rumour. Let’s know how big this change is and how it will affect your pocket.

The news of a potential 17.5% increase in the Social Security tax has sparked a wave of concern among employees and self-employed individuals. The tax is currently 12.4%, but reports say the increase may be needed to maintain the current benefits system. In this article, we will break down every aspect, facts, and figures of this potential change so you can understand what changes may be coming in the future.

What is Social Security Tax?

The Social Security tax is collected by the US government from employees, self-employed individuals, and employers. It is used to pay for the benefit of retired individuals, people with disabilities, and families of deceased working individuals. The Social Security tax is split between employees and employers or paid entirely by self-employed individuals. The amount collected goes into the Social Security Trust Fund, which is used to pay existing beneficiaries.

Current Social Security Tax Rate (2023–2024)

Although the Social Security current tax rate is 12.4%, this rate may not be enough to meet future Social Security responsibilities due to rising life expectancy, inflation, and the growing number of retirees. With this situation in mind, the possibility of a major increase cannot be ruled out. In this article, we will tell you how significant this change can be and what impact it can have on your personal finances.

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Is Social Security tax in 2024 is 17.5%?

As of 2024, there has been no official announcement of a 17.5% increase in Social Security taxes. However, reports from the trustees of the Social Security program indicate that the tax rate could rise to 17.5% in the future to maintain current benefits. This would be a significant increase from the current 12.4% rate, putting an additional burden of about $2,500 annually on the average family.

Why is there talk of a 17.5% increase?

Experts believe there are a few major reasons for raising the Social Security tax rate:

1. Aging population: As the population ages, more people are receiving Social Security benefits and fewer people are contributing through payroll taxes.
2. Longer life: People are living longer than ever before, which means they are receiving Social Security benefits for longer.
3. Inflation Adjustment (COLA): Social Security benefits are adjusted annually to keep pace with inflation. In 2024, benefits are set to increase by 3.2%, compared to 8.7% in 2023, putting further financial pressure on the system.
4. Revenue Shortage: If significant tax increases are not made, the Social Security Trust Fund could face a shortfall in the next few decades.

Given these reasons, it is important to understand that the possibility of tax rate increases cannot be ignored to maintain the sustainability of the Social Security system.

Who Pays Social Security tax?

In the United States, Social Security tax is paid by both employees and employers. Currently, the tax rate for employees is 6.2%, while employers also contribute an equal 6.2%, making the total tax rate 12.4%. Self-employed individuals have to pay the entire 12.4% themselves.

Who contributes how much?

• Employee & Employer: Both contribute 6.2% of the employee’s wages up to the taxable earnings cap.
• Self-Employed: Must pay the full 12.4% on their net earnings up to the taxable earnings cap.
• Proposed Increase: If the increase to 17.5% is enacted, it would raise the total contribution significantly, potentially adding around $2,500 annually to the average household’s tax burden.

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Potential impact of a 17.5% Social Security tax hike

If the Social Security tax increased to 17.5%, it would increase the tax burden on both employees and employers. Here is the estimated impact of this change at different income levels:

• ­$50,000 income: The current tax is $6,200. At the 17.5% rate it would increase to $8,750, an additional $2,550.
• $100,000 income: The current tax is $12,400. At the proposed rate it would increase to $17,500, an additional $5,100.
• $168,600 income (maximum for 2024): The current tax is $20,896.80. At the proposed rate it would increase to $29,505, an additional $8,608.20.

This tax hike would have a big impact on personal income, which could lead to changes in spending and saving patterns.

Fact Check: New Social Security Tax

There has been no official announcement of New Social Security Tax. Most deposits for government programs will vary based on individual circumstances, including income, work history, and eligibility. To avoid becoming a victim of misinformation, always verify claims through official government websites or consult a financial advisor. The article is based on news and data. It is advised not to use this article as professional advice for use. For accurate information, refer to the official website.