The New Social Security Wage Base for 2017

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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