Social Security tax is a payroll tax imposed on all taxpayers that are working for an employer. It has a fixed tax rate that the employers also match.
At the time of writing this article, the Social Security tax rate is 6.2 percent. If an employee owes $100 in Social Security tax, employers also match this and pay with Form 941, Employer’s Quarterly Federal Tax Return. The same also goes for the Medicare tax.
Will there be an increase in the Social Security tax rate in 2022?
The purpose of Social Security tax is to fund the – well, Social Security benefits. Without it, there won’t be a way to support Social Security benefits where people with low-income wouldn’t get the help they need.
While the Social Security increase for 2022 is in the talks, it isn’t proposed by the Democrats or Republicans.
Although the Social Security tax rate is likely to remain at 6.2 percent, the benefits received by those who qualify are going to see an improvement.
Every year, Social Security benefits increase due to the cost of living adjustments, also known as the COLA. As the US saw record-high inflation over the past year, you’ll see a significant increase in the benefits received.
COLA for 2022
Though the final rate isn’t announced yet, we have speculations on how much it might be. According to many sources, the COLA rate ranges between 5.8 percent and 6.4 percent. The average of these rates is about 6 percent.
If the COLA rate were to be around 6 percent, for every $100 received from Social Security benefits, you’d get a $6 increase.
As for the average amount of increase, it’s $150 to $200. Considering that more than 65 million Americans receive Social Security benefits, the funds are likely to come from just payroll taxes. As they aren’t increased, how much the Treasury gets from this will stay the same.
We expect the tax hike to support the Social Security payments and open up more benefits to Americans to get in 2022.