by Shawn Cahill, CPA, Principal
The Social Security Administration (SSA) announced a number of cost-of-living adjustments (COLA) for 2017. A few of the highlighted changes are:
Social Security and Supplemental Security Income (SSI) beneficiaries will receive a 0.3% increase for 2017.
The Federal Insurance Contributions Act (FICA) tax rates for 2017 remain unchanged. The employer and employee FICA rate is 7.65% – 6.2% for Old Age, Survivors and Disability Insurance (OASDI; also known as the Social Security tax) and 1.45% for Hospital Insurance (HI; also known as the Medicare tax). Self-employed taxpayers FICA rate is 15.3% – 12.4% for OASDI and 2.9% for HI. The additional Medicare tax on wages and self-employment earnings on all wages in excess of $200,000 ($250,000 for joint filers; $125,000 for married filing separate filers) is 0.9%.
The maximum taxable earnings for Social Security tax (OASDI only) will increase from $118,500 to $127,200. There was no income limitation for regular Medicare tax, that remains unchanged. The maximum OASDI tax in 2017 for an employer and employee is $7,886.40 and for self-employed taxpayers is $15,772.80.
The “nanny tax” threshold for 2017 remains unchanged at $2,000. Amounts paid by a taxpayer for domestic service in their private home is not FICA wages if the amount paid during the year is less than $2,000. The threshold applies separately to each individual service provider.
The retirement earnings test exempt amount for individuals under the full retirement age increases in 2017 from $15,720 for the year ($1,310 per month) to $16,920 for the year ($1,410 per month). The exempt earnings amount for Individuals in the year they reach full retirement age increases in 2017 from $41,880 for the year ($3,490 per month) to $44,880 for the year ($3,740 per month) (Note: This only applies for the months prior to attaining full retirement age.). There is no limit on earnings beginning the month an individual attains full retirement age.
References
SSA Press Release: Social Security Announces 0.3 Percent Benefit Increase for 2017https://www.ssa.gov/news/press/releases/#/post/10-2016-1
Social Security Fact Sheet: 2017 Social Security Changes https://www.ssa.gov/news/press/factsheets/colafacts2017.pdf