The Social Security Administration (SSA) announced this week that the maximum amount of wages in 2018 subject to the 6.2% Social Security tax (old age, survivor, and disability insurance) will rise from $127,200 to $128,700, an increase of a about 1%. By comparison, the 2017 wage base increased more than 7% over the 2016 wage base.
The maximum amount of Social Security tax a taxpayer could pay will therefore increase from $7,886.40 in 2017 to $7,979.40 in 2018, an increase of $93.
There is no limit on the amount of wages subject to the other portion of the FICA tax, the 1.45% Medicare tax.
The SSA also announced that Social Security beneficiaries will get a 2% increase in benefits in 2018, after receiving a 0.3% increase in benefits in 2017 and no increase in 2016. The average retiree will receive an increase of $27 a month.
Among the other increases announced is the amount a worker under full retirement age can earn before he or she has Social Security benefits reduced. The limit increases from $16,920 for 2017 to $17,040 for 2018, after which $1 in benefits is withheld for every $2 earned above the limit.
Adapted from the Journal of Accountancy 10/13/17.