An increase in the base wage for old age survivors and disability insurance (OASDI) was announced recently by the Social Security Administration (SSA). The new rate increases from $113700 to $117000 in 2014 and means that employees and employers will pay an equal maximum amount of $7254 in OASDI in 2014. As estimated 10 million of the 165 million workers who will pay the OASDI tax in 2014 exceed the higher wage base according to the SSA.
Taxpayers are reminded that the Medicare hospital insurance (HI) portion of the tax also paid by employees and employers has no wage limit. It remains unchanged from 2013 and applies to all wages at a 1.45% rate. For wages exceeding $200000 for a single taxpayer and $250000 for married taxpayers filing jointly the new additional Medicare tax of .9% will apply also. There is no employer portion for this tax but employers are still required to withhold the employee portion.
A 1.5% cost of living increase for Social Security benefits will also go into effect next year. In 2014 the amount of wages under which domestic employees will not be subject to Social Security taxes will increase to $1900 and $1600 for election officials and workers.
For more information on how the Social Security base wage will affect your taxes or for more information about other tax changes in store for 2014 contact Lindemeyer CPA.