The Social Security Administration (SSA) that the maximum amount of wages in 2017 subject to the 6.2% Social Security tax (old age, survivor, and disability insurance) will rise from $118,500 to $127,200, an increase of more than 7%. By comparison, the 2016 wage base was unchanged from 2015.
The maximum amount of Social Security tax a taxpayer could pay will therefore increase from $7,347 in 2016 to $7,886.40 in 2017, an increase of $539.40.
The SSA also announced that Social Security beneficiaries will get a 0.3% increase in benefits in 2017, after receiving no increase in 2016. The average retiree will receive an increase of $5 a month.
Among the other increases is the amount a worker under full retirement age can earn before he or she has Social Security benefits reduced. The limit increases from $15,720 a year to $16,920 for 2017, after which $1 in benefits is withheld for every $2 earned above the limit. Last year, this limit also did not increase because of low inflation.
There is no limit on the amount of wages subject to the other portion of the FICA tax, the 1.45% Medicare tax.
—Sally P. Schreiber ([email protected]) is a JofA senior editor.