Each year the Social Security Administration (SSA) sets the maximum amount of wages subject to social security taxes (old age, survivor, and disability insurance). For 2018, the wage base is going up from $127,200 in 2017 to $128,700. Keep in mind that the employee and the employer each pay a 6.2% tax on the eligible wage base up to this maximum. Self-employed individuals must pay both the employer and employee tax, but they can deduct 50% as a business expense.
The maximum amount that an employee will pay in 2018 increases to $7,979.40. The comparable tax in 2017 is $7,886.40.
The primary reason for a cap on wages is that benefits are also capped. A person paid $500,000 pays the same amount of social security tax that a person making $127,200 in 2017. But the benefit is also the same.
Beneficiaries will also receive a bump of 2% in benefits in 2018.
Note the Medicare tax of 1.45% tax is not subject to a cap. Every dollar of eligible wages is subject Medicare tax.