The Social Security Administration’s Office of the Chief Actuary (OCA) has projected, under all three of its methods of forecasting, that the Social Security wage base will increase from $127,200 for 2017 to $130,500 for 2018.
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). There is a maximum amount of compensation subject to the OASDI tax, but no maximum for HI. The FICA tax rate for employers is 7.65%, which consists of 6.2% for OASDI on the first $127,200 of an employee’s wages for 2017 (maximum tax is $7,886.40 [6.20% of $127,200]) and 1.45% Medicare tax on the employee’s total wages (no ceiling).
For 2017, an employee will pay:
- 6.20% Social Security tax on the first $127,200 of wages (maximum tax is $7,886.40 [6.20% of $127,200]), 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 2017, the self-employment tax imposed on self-employed people is:
- 12.40% OASDI on the first $127,200 of self-employment income, for a maximum tax of $15,772.80 (12.40% of $127,200); 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).
The 2018 projections were included as part of the annual report to Congress by the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Fund programs (the 2017 OASDI Trustees Report). The OCA provides three kinds of forecasts for Social Security wage bases (intermediate, low-cost, and high-cost). All three forecasts predict that the Social Security wage base will increase from $127,200 in 2017 to $130,500 in 2018.
The SSA intermediate forecasts through 2026 are as follows:
- 2018 – $130,500
- 2019 – $135,600
- 2020 – $142,200
- 2021 – $148,500
- 2022 – $155,100
- 2023 – $161,700
- 2024 – $168,000
- 2025 – $174,300
- 2026 – $180,900
Actual annual increases to the wage base are announced in October of the preceding year and are based on then-current economic conditions. As a result, the OCA’s forecasts, especially the longer-range ones, are subject to change. Last year, the OCA projected under its intermediate forecast that the Social Security wage base would be $126,000 in 2017; the correct figure turned out to be $127,200.
The OCA is projecting that the Social Security trust fund will become insolvent by 2034, and that the Disability Insurance (DI) trust fund will become insolvent in 2023.
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