Social Security Administration Announces a 5.9 Percent COLA

(Parker Tax Publishing November 2021)

The Social Security Administration announced that social security and supplemental security income (SSI) benefits for approximately 70 million Americans will increase 5.9 percent in 2022. The amount of earning subject to social security tax will be $147,000 in 2022. Social Security 2022 Fact Sheet.

On October 13, the Social Security Administration (SSA) issued a press release announcing that, in January 2022, a 5.9 percent cost-of-living adjustment (COLA) will take effect with respect to benefits payable to more than 64 million social security beneficiaries. Increased payments to approximately 8 million supplemental security income (SSI) beneficiaries will begin on December 30, 2021. The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor's Bureau of Labor Statistics.

The Social Security's Old-Age, Survivors, and Disability Insurance (OASDI) program limits the amount of earnings subject to tax for a given year. The same annual limit also applies when those earnings are used in a benefit computation. This limit changes each year with changes in the national average wage index. This annual limit is referred to as the contribution and benefit base.

The SSA announced that, for 2022, the maximum amount of an individual's earnings subject to social security tax is $147,000. The OASDI tax rate for wages paid in 2022 is set by statute at 6.2 percent for employees and employers, each. Thus, an individual with wages equal to or larger than $147,000 will contribute $9,114 to the OASDI program in 2022, and his or her employer will contribute the same amount. The OASDI tax rate for self-employment income in 2022 is 12.4 percent.

For a discussion of the taxation of social security benefits, see Parker Tax ¶73,910.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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