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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.

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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.

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

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