Are there changes to Social Security taxation of benefits or income thresholds for 2026?
Executive summary
For 2026, the Social Security Administration (SSA) announced a 2.8% cost‑of‑living adjustment (COLA) for benefits and an increase in the maximum earnings subject to the Social Security (OASDI) payroll tax to $184,500 (up from $176,100 in 2025) [1] [2] [3]. The payroll tax rates themselves are not changing, but the higher wage base means higher-earning workers may pay more in Social Security taxes in 2026 [4] [2].
1. What changed for 2026: COLA, wage base and earnings limits
The SSA set a 2.8% COLA for 2026 that affects about 71–75 million beneficiaries, raising monthly benefits and several related thresholds; the announcement also included an increase in the maximum amount of earnings subject to Social Security tax (taxable maximum) to $184,500 for 2026 from $176,100 in 2025 [1] [2] [5] [3]. The agency likewise updated the earnings‑test thresholds used when beneficiaries work before full retirement age — for example, the higher limits for people under FRA and those reaching FRA in 2026 are rising [6] [7].
2. Payroll tax rate vs. taxable wage base: what to expect on paychecks
The 12.4% OASDI tax (split 6.2% employee / 6.2% employer) remains unchanged; the change is the wage base — the portion of earnings subject to that tax — increasing to $184,500, which means higher‑paid employees who exceed last year’s cap will see more wages taxed in 2026 [4] [2] [8]. Several outlets explain the practical result: an individual earning at or above the 2026 cap would have $184,500 × 6.2% withheld from wages for the employee share (and the same amount paid by the employer) [8] [9].
3. Taxation of Social Security benefits — rules vs. proposed bills
Current federal rules determining whether Social Security benefits are taxable (up to 50% or 85% depending on "combined income" thresholds) remain in the established framework; available SSA and reporting sources describe COLA and taxable wage base changes but do not state that the federal taxation formulas themselves were changed by SSA for 2026 [1] [2]. However, separate congressional proposals have been reported that, if passed, would eliminate federal taxes on Social Security benefits starting for the 2026 tax year and offset revenue by raising the payroll tax wage base — but those are legislative prospects, not enacted SSA policy; for example, one bill described would end benefit taxation starting in 2026 and raise the wage base to tax wages above a much higher threshold [10]. Available sources do not confirm enactment of such a law; reporting frames it as contingent on congressional action [10] [11].
4. State‑level changes can differ — examples to watch
Some states are changing how they tax Social Security. Reporting notes West Virginia is phasing out state taxation of Social Security benefits, moving to full exemption for 2026 tax returns (filed in 2027), which is separate from federal rules and varies by state [11]. Readers should check their state revenue department for specific local changes, because state treatments diverge from federal policy [11].
5. How the earnings test and benefit offsets shift in 2026
SSA also raised the limits under the retirement earnings test for 2026, meaning beneficiaries working before full retirement age can earn more before benefits are reduced: examples in reporting show higher thresholds for those under FRA all year and those reaching FRA in 2026 [6] [7] [12]. Different rules apply depending on whether you are under FRA for the whole year or reach FRA during the year [6] [7].
6. Practical implications and open questions
Practical effects include slightly larger benefit checks from the COLA but also potentially higher Medicare Part B premiums and differing net impacts once premiums and any taxes are applied [13] [12]. For higher earners, the bigger taxable wage base directly increases OASDI withholding. Whether federal taxation of Social Security benefits changes widely in 2026 depends on legislation that reporting identifies as proposed or under consideration; those proposals are not the same as SSA‑announced administrative changes [10] [14]. Available sources do not mention any other SSA administrative repeal of benefit taxation for 2026 (not found in current reporting).
Bottom line: SSA announced the 2026 COLA (2.8%) and raised the taxable wage base to $184,500 — payroll tax rates are unchanged — while proposals in Congress could change federal taxation of benefits but, as of the reporting cited here, are not enacted policy [1] [2] [10]. Check SSA.gov and your state tax authority for official details and watch legislative developments if you follow proposals to alter benefit taxation [2] [11].