These thresholds are not inflation-adjusted, and thus they apply to more employees each year.
$200,000 for single and all other taxpayers.Īdditional Medicare Tax withholding applies only to employee compensation in excess of these thresholds in a calendar year. $125,000 for married taxpayers who file separately. $250,000 for married taxpayers who file jointly. The threshold annual compensation amounts that trigger the Additional Medicare Tax are: Aīrochure posted on the SSA website describes the extent to which benefits are reduced for excess earnings above these limits.įor highly compensated employees, Medicare takes a larger bite under a provision of the Affordable Care Act that makes the employee-paid portion of the Medicare FICA tax subject to a 0.9 percentĪdditional Medicare Tax on amounts over a statutory threshold. For those who turn 66 in 2016, the earning limit remains at $41,880. The annual earnings limit for those who both work and claim Social Security benefits will stay at $15,720 in 2016 for individuals who opt to receive benefits early (ages 62 through 65). The Medicare portion is 1.45% on all earnings. The Social Security portion is 6.20% on earnings up to the applicable taxable maximum amount. Note: The 7.65% tax rate is the combined rate for Social Security and Medicare. FICA tax rates are statutorily set, and therefore require new tax legislation to be changed.įor employees, the Medicare payroll tax rate is 1.45 percent on all earnings, bringing the combined Social Security and Medicare payroll tax for employees to 7.65 percent-with only the Social Security portion limited to the $118,500 earned-income threshold.Įmployers also pay a matching 1.45 percent of wages to Medicaid, while those who are self-employed must pay both the employer and employee portions of FICA taxes. Social Security and Medicare payroll taxes are collected together as the Federal Insurance Contributions Act (FICA) tax. For 2016, that’s one task less for overburdened HR staff and payroll administrators. employers must adjust their payroll systems to account for the higher taxable wage base under the Social Security payroll tax, and notify highly compensated employees affected by the change that more of their paychecks will be subject to the tax. This taxable wage base usually goes up each year-it rose from $117,000 in 2014 to $118,500 in 2015. Social Security is financed by a 12.4 percent tax on wages up to the annual threshold, with half (6.2 percent) paid by workers and the other half paid by employers. Earnings above this amount are not subject to the Social Security portion of the payroll tax or used to calculate retirement payouts. 
The maximum amount of wages subject to Social Security taxes will also remain unchanged at $118,500. 15, 2015, the Social Security Administration (SSA) announced that there will be no increase in monthly Social Security benefits in 2016, and that
HR professionals won’t have to adjust their payroll tax systems in 2016 for a Social Security FICA increase, as the amount of earned income subject to Social Security taxes won’t change, given the absence of inflation and tepid wage increases over the past year.īut the modest amount of inflation this year was enough to cause small upward adjustments in tax filers’ income tax brackets for 2016. For more about 2017 Social Security earnings limits and other tax adjustments, see theĢ017 Payroll Taxes Will Hit Higher Incomes. Update: Maximum earnings subject to the Society Security payroll tax will increase in 2017.
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