The Social Security Administration announced on October 14 that benefits will rise 3.6% in 2027 and that the maximum amount of earnings subject to Social Security tax will climb to $192,300, up from $184,500.
The cost-of-living adjustment gets most of the headlines, but the higher earnings cap is the number that touches your tax bill. Self-employed workers pay both halves of Social Security tax, so a bigger cap can mean a bigger bill if your income is high enough.
What The 2027 Social Security Update Actually Does
The 3.6% increase applies to nearly 72 million Social Security beneficiaries beginning in January 2027, and the agency says the average retirement benefit will rise by about $75 a month. Roughly 7.3 million SSI recipients see their increase begin December 31, 2026, and the agency counts about 76 million people in total receiving higher payments.f
The adjustment is tied to changes in the CPI-W, a price measure calculated by the Bureau of Labor Statistics. Benefit notices will appear in online my Social Security accounts in late November, and people without an account need to create one by November 18 to view theirs online.
Why This Matters For Self-Employed Workers
Self-employment tax includes a 12.4% Social Security portion that applies only up to the annual cap. Raising the cap by $7,800 means a worker who earns above it could owe roughly $967 more in Social Security tax for 2027. The 2.9% Medicare portion has no cap, so it is unaffected by this change.
If your net earnings sit well below the cap, the higher figure will not change your tax bill. The COLA still matters, though, because it shapes the retirement income that you or your parents, clients and customers may rely on.
What Self-Employed Workers Should Do Next
If your income is near or above the cap, update your 2027 estimated tax projections early so the higher Social Security portion does not catch you short at quarterly deadlines. A quick call with your tax preparer in the fourth quarter is usually enough to reset the numbers.
Everyone approaching retirement should create a my Social Security account before November 18 and check that their earnings record is accurate, since self-employed income is what drives your future benefit.
What To Watch Next
Look for the IRS to release its 2027 tax figures, which will show how brackets and deductions move with inflation. Our earlier piece on projected 2027 tax brackets gives a preview of what to expect.
Retirement plan contribution limits for 2027 are also due from the IRS, and they will help you plan how much to put into a solo 401(k) or SEP IRA next year.
