Social Security Wage and Nanny Tax Threshold Increases for 2018


The Social Security Administration has announced that the wage base for computing the Social Security tax (OASDI) in 2018 will increase to $128,700, up from $127,200 for 2017.

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. For 2018, the FICA tax rate for employers is 7.65% (6.2% for OASDI and 1.45% for HI). For 2018, an employee will pay:

  • 6.2% Social Security tax on the first $128,700 of wages (maximum tax is $7,979.40 [6.2% of $128,700]), 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 2018, the self-employment tax imposed on self-employed people is:

  • 12.4% OASDI on the first $128,700 of self-employment income, for a maximum tax of $15,958.80 (12.40% of $128,700); 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 2018, cash remuneration paid by an employer for domestic service in the employer’s private home is not FICA wages if the amount paid during the year is less than $2,100. This is up from $2,000 for 2017.

For more information about this article, please contact our tax professionals at taxalerts@windes.com or toll free at 844.4WINDES (844.494.6337).