Nothing sparks joy at the start of the year like preparing for tax season. While that statement is not remotely true, it is important to get started as early as possible. In 2022, slightly over two years into the pandemic, taxes are a little more complicated.
Factoring in COVID-related aid and stimulus checks might make tax preparation longer than in years prior. Luckily, Social Security taxes remain simple as Georgina Tzanetos reports on 2022’s maximum taxable earnings for Gobankingrates.com.
Social Security is funded by payroll taxes; however, your earnings are taxed only up to a certain limit — the maximum taxable earnings. Social Security only taxes up to the first $147,000 you earn in 2022. That means if you make more than that, any earnings after that amount will not be taxed by the Social Security Administration. The purpose of this is to establish a balance of benefits you pay into and receive from the system. The highest benefit amount in 2022 is approximately $4,100. Those that earn more, pay more into the system, and therefore receive a higher benefit.
Bear in mind, making more than the maximum taxable earnings does not affect how your actual Social Security benefits might be taxed. This only affects how your other, traditional income is taxed. If you receive benefits and an income at the same time, you’ll still pay payroll taxes and potentially taxes on your benefits. The Council for Retirement Security wants to protect benefits, regardless of how much you pay into the system; paying anything into Social Security earns you the right to a benefit.