The 2018 Social Security wage base increased by $1,500. The wage base in 2018 is $128,700.
The 2017 Social Security wage base was $127,200. The Social Security wage base has increased in five of the last six years.
Changes to the Social Security wage base were announced last week.What is a Social Security Tax Wage Base?
Social security taxes, (or OASDI taxes) are the taxes that are taken from your paycheck to contribute to the social security program. However, there is a wage base limit, and earnings above this amount are not taxed.
The social security tax wage bases are per person, and are not impacted by a husband and wife who meet the wage base when adding their incomes together. It’s also not impacted by your tax filing status or dependents.What Happens When You Reach the Social Security Limit?
Any earnings over the tax wage base are not subject to social security taxes. Reaching the taxable wage base allows you to take home more of your money in your paycheck and save on taxes.
In fact, I once had a professor in college, who used the social security wage base as an earnings goal each year, because once you earned money over the limit, it was like getting an automatic raise.
However, it’s also important to understand that those same limits will apply when you qualify for Social Security and your benefits are computed.Social Security Tax Rate
The current social security tax rate is 6.2% of your earnings (or 12.4% for self employed tax), and unlike saving on income taxes, you can’t deduct retirement contributions to save on your social security taxes.
The social security tax rate is separate from medicare taxes, currently at 1.45% (or 2.9% for self employed), which has no wage base limit. It increased to 2.35% due to the Health Care Reform Bill for high earners. The increase is part of what funds the Health Insurance Premium Tax Credit.Wage Base History
Here are the social security taxable wage base limits for each year since My Dollar Plan started:Wage base 2007: $97,500 Wage base