12 October 2023 Social Security wage base to increase in 2024
The Social Security wage base will increase from $160,200 to $168,600 in 2024, higher than the $167,700 high-cost and low-cost estimate published in the 2023 Annual Report of the Board of Trustees. (See EY Tax Alert 2023-0651; Social Security Administration Press Release.) The Medicare tax rate for 2023 remains at 1.45% of all covered earnings for employers and employees. The Additional Medicare Tax of 0.9% applies to earned income of more than $200,000 for single filers (additional thresholds apply to other filing status types). While employers are required to withhold the additional 0.9% on covered wages over $200,000, there is no corresponding employer tax. The annual adjustment to the Social Security wage base is based on the increase in average wages. Some states and localities index the annual adjustments to their minimum wage to increases to the Consumer Price Index (CPI). Because of current inflation, some jurisdictions have announced significant increases for 2024; for instance, the East Palo Alto, California minimum wage will increase from $16.50 to $17.10, effective January 1, 2024. These higher minimum wage rates could contribute to a substantial increase to the Social Security wage base in 2025. For the complete Social Security Administration fact sheet go here.
* Employers must withhold the Additional Medicare Tax of 0.9% of wages over $200,000. There is no corresponding employer tax.
Document ID: 2023-1696 | ||||||||||||||||||||||||||||||||||||||||||||||
