16 Jan Social Security Taxable Wage Base Increasing to $127,200 in 2017
Social Security Taxable Wage Base Increasing to $127,200 in 2017
The Social Security Administration (SSA) has announced that the maximum earnings subject to Social Security (OASDI) tax will increase from $118,500 to $127,200 in 2017 (an increase of $8,700) [SSA News Release, An Increase in Social Security Benefits for 2017, 10/18/16; SSA Fact Sheet, 2017 Social Security Changes].
The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees, and self-employed workers — one for Old Age, Survivors and Disability Insurance (OASDI, commonly known as the Social Security tax), and the other for Hospital Insurance (HI, commonly known as the Medicare tax).
For 2017, the FICA tax rate for both employers and employees is 7.65% (6.2% for OASDI and 1.45% for Medicare). For 2017, an employer must withhold:
• (a) 6.2% Social Security tax on the first $127,200 of employee wages (maximum tax is $7,886.40; i.e., 6.20% × $127,200), plus
• (b) 1.45% Medicare tax on the first $200,000 of employee wages, plus
• (c) 2.35% Medicare tax (regular 1.45% Medicare tax + 0.9% additional Medicare tax) on all employee wages in excess of $200,000. (See Payroll Guide ¶ 4055 for further information on the 0.9% additional Medicare tax.)
Social Security and Supplemental Security Income (SSI) benefits will increase by 0.3% in 2017. The average monthly Social Security benefit will increase from $1,355 to $1,360, and the maximum federal SSI monthly payment to an individual will increase from $733 to $735. The maximum federal SSI monthly payment to a couple will increase from $1,100 to $1,103 in 2017. The amount of earnings that is required in order to be credited with a quarter of Social Security coverage will increase from $1,260 to $1,300.
The retirement earnings test remains in effect for individuals below normal retirement age (age 65 to 67, depending on year of birth) who continue to work while collecting Social Security benefits. For affected individuals, $1 in benefits will be withheld for every $2 in earnings above $16,920 in 2017 (up from $15,720 in 2016). For working individuals collecting benefits who reach normal retirement age (NRA) in 2017, $1 in benefits will be withheld for every $3 in earnings above $44,880 (up from $41,880 in 2016), until the month that the individual reaches NRA. After that month, there is no limit on earnings.
This article was contributed by Thomson Reuters CheckPoint.