Tax News Update    Email this document    Print this document  

October 12, 2023
2023-1696

Social Security wage base to increase in 2024

  • The Social Security wage base will increase from $160,200 to $168,600 in 2024.
  • The maximum employee share of the Social Security tax contribution will increase from $9,932.40 to $10,453.20 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.

Social Security, Medicare and disability insurance contributions

2023 compared to 2024

  •  

Description

2023

2024

Increase

Social Security tax rate for employees

6.2%

6.2%

 -0-

Social Security tax rate for employers

6.2%

6.2%

 -0-

Social Security wage base

$160,200

$168,600

 $ 8,400

Maximum Social Security tax for employees

$9,932.40

$10,453.20

 $520.80

Medicare tax rate for employers

1.45%

1.45%

 -0-

Medicare tax rate for employees

1.45%*

1.45%

 -0-

Medicare tax rate for employees on wages above

$200,000*

2.35%

(1.45% Medicare

+0.9% Additional Medicare)

2.35%

(1.45% Medicare

+0.9% Additional Medicare)

 -0-

Medicare wage base

No limit

No limit

 N/A

* Employers must withhold the Additional Medicare Tax of 0.9% of wages over $200,000. There is no corresponding employer tax.

———————————————

Contact Information
For additional information concerning this Alert, please contact:
 
Workforce Tax Services - Employment Tax Advisory Services
   • Kristie Lowery (kristie.lowery@ey.com)
   • Kenneth Hausser (kenneth.hausser@ey.com)
   • Debera Salam (debera.salam@ey.com)

Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor

 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

Copyright © 1996 – 2024, Ernst & Young LLP

 

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

 

EY US Tax News Update Master Agreement | EY Privacy Statement