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Social Security Announces Increase in Wage Base

By October 20, 2016No Comments

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.
SSA Press Release: Social Security Announces 0.3 Percent Benefit Increase for 2017
Social Security Fact Sheet: 2017 Social Security Changes