By Abhinav Chhabra, Ledger Brigade | Published October 14, 2026

Breaking update (October 14, 2026): The Social Security Administration announced its 2027 figures today, including a 3.6% COLA and a new taxable wage base of $192,300. Here's what it means for your payroll.

Earlier today, October 14, 2026, the Social Security Administration released its 2027 numbers. The headlines are all about the 3.6% cost-of-living adjustment (COLA) for retirees.

For employers, the more important number is the Social Security wage base: the maximum amount of each employee's wages that is subject to Social Security tax. It is rising from $184,500 in 2026 to $192,300 in 2027.

That change affects your 2027 payroll costs. It also makes one year-end decision worth a closer look: whether to pay bonuses in December or January.

The 2027 numbers at a glance

2026 2027
Social Security wage base $184,500 $192,300
Social Security tax rate (employee / employer) 6.2% / 6.2% 6.2% / 6.2%
Maximum Social Security tax per employee (each side) $11,439.00 $11,922.60
Medicare tax rate (employee / employer) 1.45% / 1.45%, no cap 1.45% / 1.45%, no cap
Additional Medicare Tax (employee only) 0.9% on wages over $200,000 0.9% on wages over $200,000

What it costs your business

For every employee earning $192,300 or more in 2027:

  • Employer: up to $483.60 more in Social Security tax ($7,800 × 6.2%)
  • Employee: the same $483.60 more withheld from their pay
  • Self-employed individuals: up to $967.20 more, because they pay both halves (12.4%) on net self-employment earnings

For a team of 10 employees earning above the cap, that's about $4,836 in extra employer payroll tax in 2027. It's not a large number, but it should be in your 2027 budget.

Employees earning below $184,500 are not affected by the change. They already pay Social Security tax on every dollar.

The year-end decision: December or January bonus?

Social Security tax applies to wages when they are paid, not when they are earned. Each year the wage base resets on January 1.

So a bonus paid on December 31 counts toward 2026 wages, and the same bonus paid on January 5 counts toward 2027 wages. For some employees, that one week changes the tax bill. For others, it makes no difference at all.

Example 1: Timing matters

A sales manager earned $190,000 in 2026 thanks to a strong commission year, so they are already over the $184,500 cap. In 2027, they expect a base salary of about $150,000. The business plans a $20,000 bonus.

  • Paid in December 2026: no Social Security tax, because they're already over the 2026 cap.
  • Paid in January 2027: their 2027 wages become $170,000, which is under the $192,300 cap, so the full bonus is taxed at 6.2%.

Difference: $1,240 for the business and $1,240 for the employee.

Example 2: Timing makes no difference

A senior engineer earns $300,000 a year in both 2026 and 2027.

If the bonus is paid in January, it simply means they reach the 2027 cap a few weeks earlier. Their total Social Security tax for 2027 is still capped at $11,922.60.

Difference: $0.

Example 3: Timing makes no difference

An office manager earns $95,000 a year in both years. They are under the cap in both years, so a $5,000 bonus carries the full 6.2% whether it's paid in December or January.

Difference: $0.

The rule of thumb

Bonus timing only saves Social Security tax for employees who are over the 2026 cap but expect to be under the 2027 cap. These are usually people with an unusually high-earning year: big commissions, a one-off payout or a promotion mid-year.

Medicare tax (1.45% on each side) applies to every dollar either way, so timing doesn't change it. For employees whose wages go over $200,000 in a year, the employee-only 0.9% Additional Medicare Tax can also shift between years, so check it for your highest earners.

The deduction catch for accrual-basis businesses

If your business uses the accrual method, there's another point to consider.

A bonus that is fixed and owed at year-end and paid by March 15, 2027 can generally still be deducted on your 2026 return, even though it's paid in 2027. That can make January payment attractive for income tax.

But payroll taxes follow the payment date. A bonus deducted in 2026 but paid in January 2027 is still a 2027 wage for Social Security purposes.

Two exceptions apply:

  • S corporation shareholder-employees: bonuses to S corporation owners are generally deductible only in the year they're paid.
  • C corporation owners with more than 50% ownership: the same applies to them.

Cash-basis businesses deduct the bonus in the year it's paid, so a December payment gives both the 2026 deduction and the Social Security saving.

Your year-end payroll checklist

  1. List every employee who has already passed $184,500 in 2026 wages.
  2. Estimate their 2027 pay. Anyone likely to be under $192,300 is a candidate for a December bonus.
  3. Set bonus timing before the last December payroll. It can't be fixed after the cut-off.
  4. Withhold correctly on bonuses. Federal income tax on supplemental wages is generally a flat 22% (37% on supplemental wages above $1 million in a year).
  5. Update your payroll system so the $192,300 cap applies from the first 2027 payroll.
  6. Check 2026 W-2s. Box 3 (Social Security wages) plus Box 7 (Social Security tips) should not exceed $184,500 for any employee.
  7. Tell employees with two jobs that if more than the maximum was withheld across employers, they claim the excess as a credit on their own tax return. Each employer still withholds up to the cap.

Frequently asked questions

What is the Social Security wage base for 2027? $192,300, up from $184,500 in 2026, as announced by the Social Security Administration on October 14, 2026.

Does the wage base change affect employees who earn under $184,500? No. They already pay Social Security tax on all of their wages.

Is there a cap on Medicare tax? No. Medicare tax applies to all wages. An extra 0.9% Additional Medicare Tax is withheld from employees' wages above $200,000.

Can we refund an employee who had too much Social Security withheld because they changed jobs? No. Each employer withholds up to the cap separately. The employee claims any excess when they file their own return.

Should every business pay bonuses in December? No. It only saves Social Security tax for employees who are over the 2026 cap and under the 2027 cap. Accrual-basis businesses should also weigh the income tax deduction timing.

Need a second pair of eyes on year-end payroll?

Ledger Brigade supports US small businesses with payroll, bookkeeping and year-end reporting. Our team includes an ADP-certified payroll specialist, and we work across ADP, Gusto, QuickBooks and Xero.

If you'd like us to review your bonus timing, W-2 readiness or 2027 payroll setup, email hello@ledgerbrigade.com or book a free diagnostic call.

This article is general information, not tax or legal advice. Rules can change and every business is different, so check with your tax adviser before acting. Sources: Social Security Administration, "Social Security Announces 3.6 Percent Benefit Increase for 2027" (October 14, 2026).