More of each employee’s earnings will be subject to Social Security tax starting Jan. 1, 2022 when the taxable wage base climbs higher.
Next year’s number? $147,000. That’s a $4,200 increase from the current taxable wage base of $142,800.
No changes to the tax rate for 2022, the Social Security Administration (SSA) also announced. Employers and employees will continue to pay 6.2% – 12.4% combined.
So, CFOs can plan to pay a maximum of $9,114 in Social Security tax for each employee next year. Meanwhile, Payroll will withhold that same amount from each employee’s earnings.
Medicare tax: No change
In addition to Social Security, SSA provided info on the Medicare portion of FICA. The Medicare rate will stay 1.45% for 2022, and of course, the taxable wage base doesn’t apply.
And the Additional Medicare Tax, added as part of the Affordable Care Act, will stick around. Employees earning $200,000 ($250,000 if married filing jointly) will again pay that 0.9% tax.
Any workers nearing retirement?
Although the following amounts don’t affect Social Security and Medicare taxes, you may have employees on the payroll nearing retirement and wondering what benefits they’d receive if they continued working.
Here’s how much employees can earn next year before their federal retirement benefits are reduced:
- $19,560 for employees reaching full retirement age after 2022, and
- $51,960 for those reaching full retirement age in 2022, up until their birthday month. After that, there’s no reduction in benefits.
Someone who has reached full retirement age currently receives $1,565 per month from SSA. Next year’s monthly payout? $1,657. With SSA boosting benefits 5.9% in 2022 – the largest cost of living adjustment since 1982 – don’t be surprised if some of your employees start eyeing up retirement.