Individual taxable earnings of up to $168,600 annually will be subject to Social Security tax in 2024, the Social Security Administration (SSA) announced Thursday.
The amount, an increase from $160,200 in 2023, is the wage base limit that applies to earnings subject to the 6.2% OASDI tax (old age, survivors, and disability insurance). At or above the wage base limit, the employee and the employer each will pay $10,453 in tax, an increase of $521 for each party in 2024.
The Medicare hospital insurance tax of 1.45% each for employees and employers remained unchanged for 2024 (it has no wage limit). Individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly and $125,000 for married taxpayers filing separately) pay an additional hospital insurance tax under Sec. 3103(b)(2) of 0.9% of wages with respect to employment (also unchanged).
Self-employed individuals pay self-employment tax equal to the combined OASDI and Medicare taxes for both employees and employers (i.e., 12.4% of net self-employment income up to the OASDI wage base plus 2.9% in Medicare taxes on any amount of net self-employment income, with an offsetting above-the-line income tax deduction of half of the self-employment tax (also unchanged)).
The SSA also announced Thursday a cost-of-living adjustment (COLA) of 3.2% for both Social Security and Supplemental Security Income (SSI) benefits beginning in January 2024. COLA, which is based on the consumer price index, rose 8.7% a year ago.
In 2024, retirees receiving Social Security benefits will be able to earn $59,520 in the year they reach full retirement age before their benefits are reduced by $1 for every $3 in earnings over the limit. That figure is an increase of $3,000 from 2023.
Beneficiaries younger than full retirement age can earn up to $22,320 in 2024 before their benefits are reduced by $1 for every $2 in excess earnings, up from $21,240 in 2023.
The maximum Social Security benefit for a worker retiring at full retirement age will increase to $3,822 per month in 2024 from $3,627 in 2023.
— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.
