November 28, 2020
There is an annual limit on the amount of personal earnings that subject to payroll, or Social Security tax. Above that amount, payroll taxes are no longer applied to one's earnings. This same limit is applied to how much of one's earnings can be applied to their benefit calculation. For {{MAX_CAP_YEAR}}, this limit is ${{MAX_CAP | number:0}}. Earnings above that amount are not subject to payroll tax, and do not affect your social security benefit, PIA, or AIME.
This cap is updated every year to account for wage growth. In the following table, you can see the cap for every year since 1956:
The cap for years 1937 - 1974 and for 1979 - 1981 was set by statute. The cap for all other years is set by an automatic calculation as specified by the Social Security Act.
The formula for a given year X takes the National Average Wage Index (AWI) for year (X - 2), divides this by $22,935.42 which was the AWI in 1992, and multiplies it by $60,600 which was the cap in 1994.
Useful Links:
Look at your personal benefit data find out how it will compare to these maximums.
Ask other 'What If?' questions. The tool is absolutely free.