Social Security Wage Base to Rise in 2017 To$127,200, Double Most Recent Increase

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By Keith M. Hill

The Old-Age, Survivors and Disability Insurance (OASDI) taxable wage base is to increase to $127,200 in 2017 from $118,500 in 2016, the Social Security Administration said Oct. 18.

The $8,700 increase is more than double most previous wage base increases, according to the SSA contribution and benefits base chart .

The maximum 2017 OASDI portion of the Federal Insurance Contributions Act tax payable by each employee is $7,886.40, or 6.2 percent of the wage base. Employers match the employee amount with an equal contribution. The OASDI tax rate for self-employment income in 2017 is 12.4 percent.

For the Medicare (HI) portion of the FICA taxes, there is no wage base and all wages earned are subject to the HI tax, which also is paid by employers and employees.

The agency also said a 0.3 percent cost-of-living increase is to take effect in 2017, affecting several thresholds for benefits and coverage. The 0.3 percent cost-of-living adjustment (COLA) would start with benefits payable to more than 60 million Social Security beneficiaries in January 2017, the SSA said.

The Social Security tax annual coverage threshold amount for domestic employees for 2017 is $2,000, unchanged from 2016, and $1,800 for election workers, up from $1,700 in 2016.

Calculating Total FICA Tax

For tax year 2017, the 6.2 percent applies to the employer tax rate on the first $127,200 of taxable wages paid to an employee in the year. The employee tax rate is 6.2 percent. The 1.45 percent HI tax is applied to all wages earned in a tax year. In tax year 2017, for example, the first $127,200 would be subject to a total FICA tax of 7.65 percent for employers and employees.

These taxes are payable by the employer and the employee. An employee who earns $127,200 in 2017 would be subject to a total FICA tax of $9,730.80 ($7,886.40 + $1,844.40).

Taxable wages in excess of $127,200 remain subject to a 1.45 percent Medicare tax until earnings exceed $200,000. After that, employers continue to pay 1.45 percent on wages and employees are to contribute 2.35 percent.

Determining Cost-of-Living Adjustments

Generally, a COLA is based on the rise in the consumer price index for a given year. However, a COLA increase is to take effect in 2017 because the CPI-W increased 0.3 percent from the third quarter of 2014, compared with the third quarter of 2016, the agency said.

The most recent COLA increase was 1.7 percent in 2014; increases did not occur in 2015 or 2016.

The increase is first applicable to benefits for the month of December and is realized by beneficiaries in the benefits check received in January of the following year.

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