Small business owners should prepare for higher payroll taxes in 2027. The Social Security Administration has announced an increase in the Social Security wage base, which could mean additional payroll expenses for employers, particularly those with higher-earning employees.
What’s Changing in 2027?
The Social Security wage base will increase to $192,300 in 2027, up from $184,500 in 2026. This means more employee earnings will be subject to Social Security taxes.
Here’s a breakdown of the changes:
| Payroll Tax | 2026 | 2027 |
|---|---|---|
| Social Security wage base | $184,500 | $192,300 |
| Social Security tax rate | 6.2% | 6.2% |
| Maximum Social Security tax per employee or employer | $11,439 | $11,922.60 |
| Medicare tax rate | 1.45% | 1.45% |
Employers and employees each pay 6.2% in Social Security taxes on wages up to the annual limit, plus 1.45% in Medicare taxes on all covered wages.
How Will This Affect Your Business?
The higher wage base means employers could pay up to $483.60 more in Social Security taxes per high-earning employee in 2027.
Additional payroll tax considerations include:
- Medicare taxes: There is no wage limit for the 1.45% Medicare tax.
- Additional Medicare tax: Employers must withhold an extra 0.9% on employee wages exceeding $200,000, without an employer matching requirement.
- Self-employed individuals: The Social Security tax rate remains 12.4%, with a maximum Social Security tax of $23,845.20 for 2027, before considering other applicable taxes.
Plan Ahead for 2027 Payroll Costs
With payroll expenses potentially increasing, now is a good time for business owners to review compensation budgets, update payroll systems, and evaluate upcoming tax obligations.
Proactive planning can help your business manage expenses, avoid payroll tax errors, and remain compliant with IRS requirements.
Let Hare CPAs Help You Prepare
Understanding changes to Social Security and Medicare taxes is an important part of effective business tax planning.
Hare CPAs is here to help! Our team can assist with payroll tax planning, withholding requirements, and strategies to help your business prepare for 2027.
Contact Hare CPAs today to discuss how these changes may impact your business.
