Changes to Social Security in 2025 will bring about a number of important changes that will affect both working people and retired people. Some of these changes are higher tax-deductible income limits and new rules about how to pay for benefits.

Finding out how these changes might affect you is important whether you are working or getting Social Security payments.

Workers who are part of the Civil Service Retirement System (CSRS) Offset will still have to pay a total of 7%. This includes 6.2% for Social Security and an extra 0.8% for the civil service retirement fund.

Once they earn more than the amount that is taxed, however, all of their payments will go to the civil service retirement fund. People in the pure CSRS scheme don’t have to pay into Social Security and don’t have to pay any taxes on their income.

An increase in the limit of taxable income for Social Security

One of the most important changes for 2025 is that the amount of income that is taxed by Social Security will go up. Workers who make up to $176,100 will have to pay 6.2% of their salary in Social Security taxes. The previous cap was set at $168,600 in 2024, so this is more than that.

People who are part of the Federal Employees Retirement System (FERS) will stop contributing to Social Security once they hit this income level. Instead, they will continue to put money into their civil service retirement fund. This amount can be anywhere from 0.8% to 4.4%, depending on when the job was hired.

Changes to the earnings cap for Social Security recipients are a big deal for retirees and people who are getting close to retirement age.

The maximum amount of money a person can earn will go up from $22,320 in 2024 to $23,400 in 2025, for those between the ages of 62 and their full retiring age of 66 years and 10 months. People who get benefits will lose one dollar of benefits for every two dollars they earn above this cap thanks to work.

Adjustments for those reaching full retirement age in 2025

Another rule is for people who will be able to retire at full age in 2025 but have not yet done so in the early months of the year. The maximum amount of money that can be made in this case is $62,160, up from $59,520 in 2024.

If someone earns more than this amount, one dollar in benefits will be taken away for every three dollars made over the limit.

However, once full retirement age is reached, beneficiaries are no longer subject to any restrictions on how much they can earn while continuing to receive their Social Security benefits.

The impact of the Windfall Elimination Provision (WEP) and substantial earnings threshold

Another important thing to think about is the Windfall Elimination Provision (WEP), especially for some federal workers. People who have worked jobs that are covered by Social Security and also paid into the civil service retirement system will be affected by this rule.

The WEP cuts CSRS retirees’ Social Security payments if they haven’t had at least 30 years of “substantial” earnings under Social Security.

The amount of money needed to be considered “substantial” will go up from $31,275 in 2024 to $32,700 in 2025. People who have been retired for at least 30 years but haven’t met this requirement will have their Social Security payments cut.

The biggest reduction that can happen is $600 a month, but this amount goes down if the person has made more than the substantial earnings level for 20 to 30 years.

For financial planning, it’s important to know how these changes might affect both working people and people who are retired. For workers, the higher income cap that is taxed by Social Security means that higher earners will have more of their salary taxed, but they will also be able to save more for retirement.

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Also, people who are retired or close to retirement should know that making too much could lower their Social Security benefits, especially if they are still working while getting benefits.

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