Mar 09

You and Your Social Security (Tax)

By James Christy, Wealth Advisor

Corporate and Individual income tax rates may be coming down as a result of the recently-enacted Tax Reform Act, but the combined Social Security and Medicare (FICA) tax continues to go up.

For 2018, the taxable wage base for the Social Security portion of FICA is $128,700, a slight increase over the 2017 wage base of $127,200.  At a 6.2% rate, the Social Security tax is paid by both employees and employers.  Both also pay the 1.45% Medicare portion of FICA, resulting in a combined FICA tax of 7.65%.  The Medicare portion of the tax is not limited by the Social Security taxable wage base of $128,700.  All wages and salaries, without limitation, are subject to the Medicare tax, and for those individuals earning $200,000 or more ($250,000 for married filing jointly), there is a Medicare surtax of 0.9%.

Of course, self-employed persons, including independent contractors who receive a Form 1099, pay both the employer and employee portions of FICA taxes.  Accordingly, 15.3% of self-employment earnings are subject to tax, not counting any Medicare surtax for higher earning taxpayers. 

Another thing to keep in mind: Social Security benefit recipients age 70 or above who may still be working, continue to pay Social Security and Medicare tax, even though their Social Security benefit amount will not be adjusted upward for their additional  earnings after age 70.

This article is written for general educational purposes only and should not be construed as individual tax advice. For tax advice, please consult a qualified tax advisor.

 

Author
James Christy, J.D.

James Christy, J.D.

Wealth Advisor

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