What is a Taxable Wage Base?

A taxable wage base is the maximum annual wage on which a taxpayer must pay taxes.

How Does a Taxable Wage Base Work?

For example, let's assume that John earns $150,000 a year as CFO of Company XYZ. The United States government has set the taxable wage base for Social Security taxes at $110,000 this year, meaning that John will only pay Social Security taxes on the first $110,000 of his income.

Let's say that John's take-home pay is $8,000 each paycheck. Once he has earned $110,000 for the year his employer will stop withholding Social Security taxes. After John's taxable wage base is hit, his take-home pay might go up to, say, $8,250.

Why Does a Taxable Wage Base Matter?

Taxable wage base is a term most often used in reference to Social Security taxes, though the concept can apply to any income-based tax. For example, some state unemployment agencies use a taxable wage base to calculate unemployment taxes.

The Social Security taxable wage base typically increases every year or every few years.

Ask an Expert about Taxable Wage Base

All of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Taxable Wage Base.

Be the first to ask a question

If you have a question about Taxable Wage Base, then please ask Paul.

Ask a question
Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

Verified Content You Can Trust
verified   Certified Expertsverified   5,000+ Research Pagesverified   5+ Million Users