Social Security Wage Base for 2014

November 26, 2013

Today we will address the updated Social Security wage base for 2014.

 

The Social Security Administration has announced that the wage base for computing the Social Security tax in 2014 increases to $117,000 from $113,700, which was the wage base for 2013. The $3,300 increase, which is about 2.9%, is due to an increase in average total wages.

 

The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees, and self-employed workers—one for Old Age, Survivors and Disability Insurance (OASDI; commonly known as the Social Security tax), and the other for Hospital Insurance (HI; commonly known as the Medicare tax).

 

For 2014, an employer pays a 7.65% FICA tax consisting of:

  • 6.20% Social Security tax on the first $117,000 of an employee’s wages, for a maximum tax of $7,254.00 (6.20% of $117,000)

  • 1.45% Medicare tax on the employee’s total wages with no ceiling

 

For 2014, an employee pays: 

  • 6.20% Social Security tax on the first $117,000 of wages, for a maximum tax of $7,254.00 (6.20% of $117,000)

  • 1.45% Medicare tax on the first $200,000 of wages ($250,000 for joint returns; $125,000 for married taxpayers filing a separate return)

  • 2.35% Medicare tax (regular 1.45% Medicare tax + 0.9% additional Medicare tax) on all wages in excess of $200,000 ($250,000 for joint returns; $125,000 for married taxpayers filing a separate return)

 

For 2014, the self-employment tax imposed on self-employed people is:

  • 12.40% Social Security tax on the first $117,000 of self-employment income, for a maximum tax of $14,508.00 (12.40% of $117,000)

  • 2.90% Medicare tax on the first $200,000 of self-employment income ($250,000 of combined self-employment income on a joint return, $125,000 for married taxpayers filing a separate return)

  • 3.80% Medicare tax (regular 2.90% 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, $125,000 for married taxpayers filing a separate return)

 

There is a maximum amount of compensation subject to the Social Security tax, but no maximum for Medicare tax.

 

Happy Thanksgiving!

 

Disclaimer: The items included in the Tax Tip Tuesday Video Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation. IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advise contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

 

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