what is the taxable wage base 
the term taxable base refers to the maximum amount of earned income on which employees must pay social security taxes the employee s gross wages are generally equal to the taxable wage base an employer typically handles this calculation and withholds the correct amount of taxes from each of the employee s paychecks meanwhile the employee is still responsible for reporting the tax on their tax return each year the taxable wage base is also known as the social security wage base understanding the taxable wage basethe social security tax rate is 12 4 half of the tax which comes to 6 2 is paid by the employer and the employee is responsible for paying the other half through payroll deductions but social security tax is applied to earnings only up to a certain limit wages salaries and bonuses in excess of the stipulated maximum amount of earnings are not taxable the limit adjusts annually pegged to changes in the national average wage index 52the maximum amount of income that is subject to social security taxes is 160 200 in 2023 and 168 600 in 2024 2 this means that you don t pay social security taxes on any amount over these thresholds the social security tax is deducted from individuals payroll automatically along with the medicare tax keep in mind that although the social security tax is applied up to the taxable wage base the medicare tax of 2 9 has no such limit therefore it is applied to 100 of an employee s income 6an employee s taxable wage base is reported on their w 2 form the wage and tax statement each year employers prepare the w 2s annually sending copies to both the internal revenue service irs and the employee box 3 social security wages form essentially gives your taxable wage base detailing how much of an individual s earnings are subject to social security tax box 4 indicates the amount of social security tax withheld 7if you re self employed you re responsible for paying the employee and employer s portion of the social security and medicare tax to the irs 6special considerationsthe taxes that are taken out of social security wages go to fund the social security payments that millions receive each month the best known of these is the retirement benefits paid to those 65 years old and up here s a snapshot of how many individuals receive each different benefit through the social security program as of september 2023 social security tax and medicare tax are collectively known as federal insurance contributions act fica taxes the 7 65 of gross income that an employee pays toward them appears as fica taxes on their paystub and on their annual w 2 form 2taxable wage base and unemployment taxa taxable wage base is most often used in reference to social security taxes though it can also apply to any income based tax for example some state unemployment agencies use a taxable wage base to calculate unemployment taxes the following is a list of taxable wage bases to calculate unemployment insurance in 2023 in several states like the taxable wage base for social security the unemployment tax basis increases every year or every few years depending on the state in some instances an employee earns wages that are classified as excess wages the excess wage can be subtracted from gross income so that the taxable wage base is lower than gross income taxable wage base exemptionsnot every part of an individual s income is considered taxable as such even if they are included in a paycheck some common types of compensation are exempt from the taxable wage base either completely or within limits they include the covid related tax relief act of 2020 deferred the due date for the withholding and payment of the employee share of social security tax on q4 wages until the period beginning on jan 1 2021 and ending on dec 31 2021 this applied to employees whose social security wages for a biweekly pay period were less than 4 000 19examples of taxable wage basethe following are two examples of the taxable wage base and how social security taxes are calculated we ll use the 2024 taxable wage base in the examples let s say rob earns 85 000 in gross income and has a 6 2 social security tax withheld from his pay the federal government in effect will collect 5 270 6 2 x 85 000 from rob to help fund retirement and disability benefits for retirees now let s look at sue s situation suppose she earns 175 000 gross income the social security tax rate will only be applied up to the taxable wage base of 168 600 which is less than her gross income therefore sue will pay 10 453 20 6 2 x 168 600 as her contribution to the country s social security account for retirees and the disabled 