New Payroll Tax Changes: How They Could Affect Your Wallet

The payroll taxes collected from workers’ wages help to fund important Social Security programs such as unemployment insurance and Medicare. The idea behind this system is that individuals pay into the program now and can access those funds later in life if they retire or lose their job, as reported by The US News on December 6, 2022.

For 2022, the rates for payroll taxes have remained the same as in 2021. Each month, your employer will take 6.2 percent of your wages and match that amount, contributing a total of 12.4 percent to Social Security. The current rate for Medicare, as set by the IRS, is 1.45 percent per month.

However, there are some changes to the Social Security element of payroll taxes in 2022. The wage base limit for this tax has been increased to $147,000, meaning that individuals will not have to pay the Social Security portion of the payroll tax on earnings above that amount. The maximum Social Security tax that an employee will have withheld is $9,114, according to Investopedia on December 22, 2022. There is no limit for the Medicare portion of the payroll tax.

In addition, an extra 0.9 percent per month is charged on earnings above $200,000 per year. This additional tax is only paid by the worker, not the employer.

FICA taxes, collected from workers’ wages, fund Social Security and Medicare programs, including retirement, survivor, and disability benefits, inpatient hospital visits, and unemployment insurance. The rate and wage limit for Social Security tax have been changed for 2022.