SSA Reports Social Security Wage Base Increase

The Social Security Administration (SSA) recently announced that the 2012 social security wage base will increase from $106,800 to $110,100. There hasn't been a limit to the wages subject to the Medicare tax in the past few years so all covered wages are still subject to the 1.45% tax.

The FICA tax rate, which is the social security tax rate (6.2%) combined with the Medicare tax rate (1.45%), will be 7.65% for 2012. Employees and employers will each pay a maximum social security tax of $6,826.20 in 2012. Note that under the Tax Relief Act of 2010, the 2011 FICA tax rate was 4.2% for employees and 6.2% for employers, and that the rate is scheduled to be 6.2% for both employees and employers in 2012. That might change, however, as there are currently related bills being considered in Congress.

For self-employed individuals, the social security wage base in 2012 will also be $110,100. There is no limit on covered self-employment income that will be subject to the Medicare tax. The self-employment tax rate will be 15.3% (social security tax rate of 12.4% combined with Medicare tax rate of 2.9%). For a self-employed individual, the maximum social security tax in 2012 will be $13,652.40. Again, note that the 2012 FICA tax rate is scheduled to be 6.2% for both employees and employers, but that Congress is considering proposals that would change this. 

In 2012, the threshold for coverage of domestic employees under social security and Medicare will be $1,800, up from $1,700 in 2012. The coverage threshold for election workers, however, will remain at $1,500. 

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