2021 Social Security Wage Base Increases to $142,800

2021 Social Security Wage Base Increases to $142,800

The Social Security Administration (SSA) has announced that the maximum earnings subject to Social Security (OASDI) tax will increase from $137,700 to $142,800 in 2021 (an increase of $4,800) [SSA Press Release, 10/13/2020].

For 2021, the FICA tax rate for both employers and employees is 7.65% (6.2% for OASDI and 1.45% for Medicare).

For 2021, an employer must withhold:

  • 6.2% Social Security tax on the first $142,800 of employee wages (maximum tax is $8,853.60; i.e.,        6.20% × $142,800), plus;
  • 1.45% Medicare tax on the first $200,000 of employee wages, plus;
  • 2.35% Medicare tax (regular 1.45% Medicare tax + 0.9% additional Medicare tax) on all employee        wages in excess of $200,000.

 
Social Security and Supplemental Security Income (SSI) benefits will increase by 1.3% in 2021. The average monthly Social Security benefit will increase from $1,523 to $1,543, and the maximum federal SSI monthly payment to an individual will increase from $783 to $794. The maximum federal SSI monthly payment to a couple will increase from $1,175 to $1,191 in 2021. The amount of earnings that is required in order to be credited with a quarter of Social Security coverage will increase from $1,410 to $1,470.

The retirement earnings test remains in effect for individuals below normal retirement age (age 65 to 67, depending on year of birth) who continue to work while collecting Social Security benefits. For affected individuals, $1 in benefits will be withheld for every $2 in earnings above $18,960 in 2021 (up from $18,240 in 2020). For working individuals collecting benefits who reach normal retirement age (NRA) in 2021, $1 in benefits will be withheld for every $3 in earnings above $46,920 (up from $48,600 in 2020), until the month that the individual reaches NRA. After that month, there is no limit on earnings.

The SSA has a 2021 Fact Sheet on the changes.

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