Social Security Tax Wage Base Increases to $137,700 for 2020
The Social Security Administration (SSA) has announced that the wage base for computing the Social Security tax (OASDI) in 2020 will increase to $137,700, up from $132,900 for 2019.
The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees, and self-employed workers: (1) for Old Age, Survivors, and Disability Insurance (OASDI; commonly known as the Social Security tax), and (2) for Hospital Insurance (HI; commonly known as the Medicare tax). There is a maximum amount of compensation subject to the OASDI tax, but no maximum for HI.
For 2020, the FICA tax rate for employers is 7.65%-6.2% for OASDI and 1.45% for HI. For 2020, an employee will pay:
- 6.2% Social Security tax on the first $137,700 of wages (maximum tax is $8,537.40 [6.2% of $137,700]), plus
- 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), plus
- 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 2020, the self-employment tax imposed on self-employed people is:
- 12.4% OASDI on the first $137,700 of self-employment income, for a maximum tax of $17,074.80 (12.40% of $137,700); plus
- 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 on a separate return), plus
- 3.8% (2.90% regular 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).
For more information about this article, please contact our tax professionals at taxalerts@windes.com or toll free at 844.4WINDES (844.494.6337).