Month: November 2021

Social Security Wage Base Increased

It was announced by the Social Security Administration (SSA) in October that the maximum amount of an individual’s taxable earnings in 2022 subject to Social Security tax will be $147,000, up from $142,800 for 2021. The wage base limit applies to earnings subject to the tax, known officially as the old age, survivors, and disability insurance (OASDI) tax. Because the OASDI tax rate is 6.2%, an employee with total wages from an employer at or above the maximum in 2022 will pay $9,114 in tax, with the employer paying an equal amount.

The Medicare hospital insurance tax of 1.45% each for employees and employers has no wage limit and is unchanged for 2022.

Individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly and $125,000 for married taxpayers filing separately) are required to pay an additional hospital insurance tax of 0.9% of wages with respect to employment (also unchanged).

Self-employed individuals pay self-employment tax equal to the combined OASDI and Medicare taxes for both employees and employers, i.e., 15.3%, up to the OASDI wage base and 2.9% in Medicare taxes on net self-employment income above it, with an offsetting above-the-line income tax deduction of half of the OASDI-equivalent component of self-employment tax.

Social Security Benefit to Increase in 2022

Approximately 70 million Americans will see a 5.9% increase in their Social Security benefits and Supplemental Security Income (SSI) payments in 2022. Federal benefit rates increase when the cost-of-living rises, as measured by the Department of Labor’s Consumer Price Index (CPI-W).

The CPI-W rises when inflation increases, leading to a higher cost-of-living. This change means prices for goods and services, on average, are a little more expensive, so the cost-of-living adjustment (COLA) helps to offset these costs.

The Social Security Administration will mail COLA notices throughout the month of December to retirement, survivors, and disability beneficiaries, SSI recipients, and representative payees. But, if you want to know your new benefit amount sooner, you can securely obtain your Social Security COLA notice online using the Message Center in your my Social Security account. You can access this information in early December prior to the mailed notice. If you don’t have an account yet, you must create one by November 17, 2021, to receive the 2022 COLA notice online.

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