Social Security wage base increases to $127,200 for 2017
[By Robert Whirley CPA & Associates, LLC + ProActive Advisory]
The Social Security Administration has announced that the wage base for computing the Social Security tax (OASDI) in 2017 will increase to $127,200.
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 employers is 7.65%—6.2% for OASDI and 1.45% for HI.
For 2017, an employee will pay:
- 6.2% Social Security tax on the first $127,200 of wages (maximum tax is $7,886.40 [6.2% of $127,200]), plus
- 1.45% Medicare tax on the first $200,000 of wages ($250,000 for joint returns; $125,000 for married taxpayers filing a separate return), plus
- 2.35% Medicare tax (regular 1.45% Medicare tax + 0.9% additional Medicare tax) on all wages in excess of $200,000 ($250,000 for joint returns; $125,000 for married taxpayers filing a separate return). (Code Sec. 3101(b)(2))
For 2017, the self-employment tax imposed on self-employed people is:
- 12.4% OASDI on the first $127,200 of self-employment income, for a maximum tax of $15,772.80 (12.40% of $127,200); plus
- 2.90% Medicare tax on the first $200,000 of self-employment income ($250,000 of combined self-employment income on a joint return, $125,000 on a separate return), (Code Sec. 1401(a), Code Sec. 1401(b)), plus
- 3.8% (2.90% regular Medicare tax + 0.9% additional Medicare tax) on all self-employment income in excess of $200,000 ($250,000 of combined self-employment income on a joint return, $125,000 for married taxpayers filing a separate return). (Code Sec. 1401(b)(2))
- There is a maximum amount of compensation subject to the OASDI tax, but no maximum for HI.
Conclusion
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Filed under: Accounting, Taxation | Tagged: FICA, Medicare Tax, OASDI, Robert Whirley CPA, Social Security Wage Base 2017 |
The maximum monthly benefit is really hard to snag
To claim the maximum monthly Social Security benefit, you have to do the following things:
Work at least 35 years.
Earn enough for 35 years so that your salary matches or exceeds the annual wage cap.
Delay your Social Security claim until the age of 70.
Now the first and last points may not be so difficult to achieve. A lot of people manage to put in more than 35 years in the labor force, and many intentionally delay retirement in order to be able to hold off on claiming Social Security until age 70.
DEM
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