taxes

Social Security Taxes Will Nick More of Your Earnings in 2017

The maximum amount of earnings on which you pay Social Security taxes is rising to $127,200, up from $118,500 in 2016.

Question: What is the maximum amount of earnings that will be subject to Social Security taxes in 2017? How does that limit and the tax rate compare with 2016?

Answer: The maximum amount of earnings on which you pay Social Security taxes is rising from $118,500 in 2016 to $127,200 in 2017. This is the largest increase in recent years. The limit was also $118,500 in 2015, and it was $117,000 in 2014. For historical context, the Social Security tax applied to the first $76,200 of earnings in 2000, $51,300 in 1990 and $25,900 in 1980. The tax applied to the first $3,000 of earnings in 1937, when Social Security started, and the limit remained there through 1950. See the table showing the limit for every year.

The tax rate for Social Security and Medicare remains the same: 7.65% for employees and 15.30% for the self-employed. That amount is collected on wages and self-employment income covered by Social Security, up to the income limit. Earnings above that level are subject only to the 1.45% Medicare portion of the tax, or 2.90% for the self-employed. (There is no limit on the amount to which Medicare taxes apply.)

An additional 0.9% Medicare tax applies to earnings over $200,000 for individuals and over $250,000 for married couples. See the IRS’s fact sheet about Questions and Answers for the Additional Medicare Tax for more information about this tax.

For more information about the 2017 Social Security changes, see this Fact Sheet from the Social Security Administration.

Most Popular

You'll Save More on Green Home Improvements Under the Inflation Reduction Act
Tax Breaks

You'll Save More on Green Home Improvements Under the Inflation Reduction Act

Tax credits for energy-efficient home improvements will be extended and expanded by the Inflation Reduction Act.
August 12, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
3 Dated Rules of Thumb Retirees Should Think Twice About
investing

3 Dated Rules of Thumb Retirees Should Think Twice About

The tried-and-true investing and saving rules of thumb retirees depend on may no longer be as reliable as they hoped. Don’t let dated “rules” steer yo…
August 11, 2022

Recommended

EV Tax Credits Are Changing: What’s Ahead
Tax Breaks

EV Tax Credits Are Changing: What’s Ahead

President Biden has signed the Inflation Reduction Act—multi-billion-dollar climate, tax, healthcare, and energy legislation that makes key changes to…
August 16, 2022
The Inflation Reduction Act and Taxes: What You Should Know
Tax Breaks

The Inflation Reduction Act and Taxes: What You Should Know

President Biden has signed the Inflation Reduction Act of 2022—a climate, energy, healthcare, and tax bill that will increase IRS funding, and change …
August 16, 2022
What Are the Income Tax Brackets for 2022 vs. 2021?
tax brackets

What Are the Income Tax Brackets for 2022 vs. 2021?

Depending on your taxable income, you can end up in one of seven different federal income tax brackets – each with its own marginal tax rate.
August 15, 2022
You'll Save More on Green Home Improvements Under the Inflation Reduction Act
Tax Breaks

You'll Save More on Green Home Improvements Under the Inflation Reduction Act

Tax credits for energy-efficient home improvements will be extended and expanded by the Inflation Reduction Act.
August 12, 2022