Social Security Wage Base to Increase Sharply in 2017

(Parker Tax Publishing October 2016)

After leaving the Old-Age, Survivors and Disability Insurance (OASDI) wage base unchanged in 2016, the Social Security Administration (SSA) has announced an increase from $118,500 to $127,200 for 2017. The 7.34 percent increase is based on the increase in average wages. SSA 2017 Fact Sheet.

Observation: This $8,700 increase to the wage base is the largest year-over-year dollar increase since indexing began; the percentage increase is the largest since 1983.

For employees, the Social Security tax rate remains at 6.20 percent on earnings up to the wage base. For 2017, an employee with earnings equal to or exceeding the wage base will pay a maximum of $7,886.40 in Social Security taxes, an increase of $539.40 from last year's maximum.

For self-employed individuals, the OASDI tax rate for self-employment income equal to or exceeding the wage base remains at 12.40 percent. For 2017, a taxpayer with self-employment income equal to or exceeding the wage base will pay a maximum OASDI tax of $15,772.80, an increase of $1,078.80 from last year's maximum.

The SSA noted that, of the estimated 173 million workers who will pay Social Security taxes in 2017, about 12 million will pay more because of the increase in the taxable maximum.

The SSA also announced that, based on the increase in the Consumer Price Index (CPI-W) from the third quarter of 2014 through the third quarter of 2016, Social Security and Supplemental Security Income (SSI) beneficiaries will receive a 0.3 percent cost of living adjustment (COLA) for 2017.

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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