The Social Security Administration (SSA) announced on Friday that the maximum amount of wages in 2018 subject to the 6.2% Social Security tax (old age, survivor, and disability insurance) will rise from $127,200 to $128,400, an increase of a little more than 1%. By comparison, the 2017 wage base increased more than 7% over the 2016 wage base.
The maximum amount of Social Security tax a taxpayer could pay will therefore increase from $7,886.40 in 2017 to $7,960.80 in 2018, an increase of $74.40.
The SSA also announced that Social Security beneficiaries will get a 2% increase in benefits in 2018, after receiving a 0.3% increase in benefits in 2017 and no increase in 2016. The average retiree will receive an increase of $27 a month.
Among the other increases is the amount a worker under full retirement age can earn before he or she has Social Security benefits reduced. The limit increases from $16,920 for 2017 to $17,040 for 2018, after which $1 in benefits is withheld for every $2 earned above the limit.
There is no limit on the amount of wages subject to the other portion of the FICA tax, the 1.45% Medicare tax.
[Update: The Social Security Administration changed the 2018 wage base amount from $128,700 to $128,400 on Nov. 27, 2017.]
—Sally Schreiber (Sally.Schreiber@aicpa-cima.com) is a JofA senior editor.