The Social Security Administration (SSA) recently announced a 2017 cost-of-living adjustment for the Social Security taxable wage limit. The maximum amount of earnings subject to Social Security tax for 2017 will increase by 7% to $127,200 from $118,500 in 2016.
The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees, and self-employed workers. The first one is for Old Age, Survivors and Disability Insurance (OASDI or Social Security tax) and the second one is for Hospital Insurance (HI or Medicare tax).
The employer matching rate for 2017 remains unchanged with the FICA tax rate being 7.65% which consists of 6.2% for Social Security tax and 1.45% for Medicare tax.
For 2017, an employee will pay:
- 6.2% Social Security tax on the first $127,200 of wages (maximum tax for this portion is $7,886.40), plus
- 1.45% Medicare tax on the first $200,000 of wages ($250,000 for joint returns and $125,000 for married taxpayers filing a separate return), plus
- 2.35% Medicare tax (1.45% Medicare tax + 0.9% additional Medicare tax) on all wages in excess of $200,000 ($250,000 for joint returns and $125,000 for married taxpayers filing a separate return).
For 2017, a self-employed person will pay:
- 12.4% of Social Security tax on the first $127,200 of self-employment income (maximum tax for this portion is $15,772.80), plus
- 2.9% Medicare tax on the first $200,000 of self-employment income ($250,000 of combined self-employment income on a joint return and $125,000 on a separate return), plus
- 3.8% (2.9% 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 and $125,000 for married taxpayers filing a separate return).
