The Social Security wage base determines how much of your salary is subject to the Social Security tax. In 2019, the Social Security wage base increased to $132,900.

Employees and employers alike are often confused on the Social Security wage base: what it is and how it works. To properly explain the Social Security wage base, we first need to define the Social Security tax.

The Federal Insurance Contributions Act (FICA) is comprised of Social Security and Medicare. These services fund retirement and healthcare benefits for the retired and disabled. The Social Security tax is the FICA-mandated taxes. The FICA taxes 12.4% of your gross wages for Social Security and 2.9% for Medicare. However, it’s important to note that these rates are split between the employer and the employee. This means each party pays 6.2% for the Social Security tax and 1.45% for Medicare. The Medicare tax has no wage base limit you will always pay 0.9%-1.45% depending on your earnings (once you make over $200,000, the rate decreases to 0.9%). However, there is a wage base limit for Social Securityonce the income reaches $132,900 the employer cannot withhold additional wages from the employee.

Have questions on the Social Security wage base and how it applies to your business? Contact us today to learn more.

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