In 2024, the Social Security wage base for employees and self-employed people will increase.
Employees and employers can expect the wage base for computing Social Security tax to rise to $168,600 next year—a significant jump from the wage base of $160,200 in 2023.
Self-employment income and wages above this amount won’t be subject to Social Security tax.
The basics on the Social Security wage base increase
Employers pay two taxes under the Federal Insurance Contributions Act (FICA): Social Security tax (for Old Age, Survivors, and Disability Insurance) and Medicare tax (for Hospital Insurance).
The amount of compensation subject to the Social Security tax is capped at a maximum, but there is no maximum amount for the Medicare tax.
In 2024, employers should expect a FICA tax rate of 7.65%. This includes 6.2% for Social Security, with the remaining 1.45% going to Medicare.
What is changing in 2024
In 2024, employees will pay a total of:
- 6.2% Social Security tax on the first $168,600 of wages (6.2% x $168,600 makes the maximum tax $10,453.20)
- 1.45% Medicare tax on the first $200,000 of wages ($250,000 for joint returns, $125,000 for married taxpayers filing separate returns)
- 2.35% Medicare tax (regular 1.45% Medicare tax plus 0.9% additional Medicare tax) on all wages in excess of $200,000 ($250,000 for joint returns, $125,000 for married taxpayers filing separate returns)
In 2024, self-employed people pay the following rates in self-employment tax:
- 12.4% Social Security tax on the first $168,600 of self-employment income, for a maximum tax of $20,906.40 (12.4% x $168,600)
- 2.90% Medicare tax on the first $200,000 of self-employment income ($250,000 of combined self-employment income on a joint return, $125,000 on a return of a married individual filing separately)
- 3.8% (2.90% regular Medicare tax plus 0.9% additional Medicare tax) on all self-employment income in excess of $200,000 ($250,000 of combined self-employment income on a joint return, $125,000 for married taxpayers filing separate returns)
What to know if you have more than one employer
Many people worked more than one job to make ends meet in 2023. If your employees are among them, you might have questions.
Employees with a second job will have taxes withheld from two different employers. They may not ask you to stop withholding Social Security tax once they reach the wage base threshold. Even when an individual’s combined withholding exceeds the maximum amount of Social Security taxes that can be imposed for the year, each employer must withhold Social Security taxes.
For any excess withheld, the employee should see a credit on their tax return.
Questions? Smolin can help.
If you have questions about payroll tax filing or payments, contact the helpful team at Smolin. We’ll help ensure you stay in compliance while achieving the most favorable tax rate possible.