2017 Social Security Payroll Tax Increase And More
The Social Security Administration recently announced the maximum amount of earnings subject to the Social Security payroll tax would climb 7.3% ($8,700) to $127,200. The limit for 2016 was $118,500. The increase represents a $539.40 cost to an employee earning $127,200 or more.
Other Key Points:
By January 1st of each year, U.S. employers must adjust their payroll systems to account for the higher taxable wage base under the Social Security payroll tax. They should also notify applicable employees their paychecks will be subject to payroll withholding.
Employers will pay more as their 6.2% share is applied to additional earnings.
For employers and employees, the Medicare payroll tax rate is a matching 1.45% on all earnings, bringing the total Social Security and Medicare payroll withholding rate for employers and employees to 7.65% each-with only the Social Security portion (6.2%) limited to the $127,200 taxable-maximum amount.
Those who are self-employed must pay both the employer and employee portions of FICA taxes.
Additional Medicare Tax Information.
For employees who are highly compensated, Medicare will take more money. Under a provision of the Affordable Care Act, the "employee-paid" portion of the Medicare FICA tax is subject to a 0.9% Additional Medicare Tax (on amounts over a statutory threshold).
The annual compensation threshold that will activate the Additional Medicare Tax are:
$125,000 for married taxpayers who file separately.
$200,000 for single and all other taxpayers.
$250,000 for married taxpayers who file jointly.
Note: The Additional Medicare Tax should not be confused with the Alternative Minimum Tax on high incomes (which does not involve mandatory payroll withholding).
Increases in Retirement Earnings Limit.
For those claiming Social Security before reaching their full retirement age (66 for people born in 1943 through 1954), benefits are limited if they continue to work and receive earned income.
If you were born January 2, 1943, through January 1, 1955, then your full retirement age for retirement insurance benefits is 66.
If you work and are full retirement age or older, you may keep all of your benefits, no matter how much you earn. If you are younger than full retirement age, there is a limit to how much you can earn and still receive full Social Security benefits.
If you are younger than full retirement age during all of 2016, deduct $1 from your benefits for each $2 you earn above $15,720.
If you reach full retirement age during 2016, deduct $1 from your benefits for each $3 you earn above $41,880 until the month you reach full retirement age.
Copyright Drip Marketing, Inc