The Social Security Administration has announced its increases to the 2017 maximum amount of earnings subject to the Social Security tax and the monthly benefits to be paid to Social Security beneficiaries.
Earnings: The maximum amount of earnings subject to the Social Security tax would increase 7.3 percent to $127,200 in 2017 from the current $118,500. This is the largest increase in more than three decades, and will generate $1,078 per worker who reaches the contribution plateau. It is estimated that 12 million of the 173 million workers will be affected by this increase.
Benefits: Social Security beneficiaries will receive a 0.3 percent cost of living (COLA) benefit increase beginning in January 2017. For beneficiaries of Supplemental Security Income (SSI), this increase will begin on December 30, 2016.
The 2017 Social Security combined tax rate will remain at 15.3% for self-employed individuals. Individuals who receive a W-2 will be responsible for half of this tax (7.65%) and the employer will be responsible for the other half (7.65%). The Social Security portion (OASDI) is 6.20% on earnings up to the applicable taxable maximum amount of $127,200. The Medicare portion (HI) is 1.45% on all earnings (no dollar ceiling). Individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly) will pay an additional 0.9 percent in Medicare taxes.
Social Security beneficiaries, while sure to be pleased that their monthly benefit has at least increased, will likely be disappointed when the announcement is made regarding the expected increase to their Medicare monthly premiums. The Medicare premium changes, when announced, will be available at www.Medicare.gov.
If you want to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.