The Social Security Administration (SSA) announced on  Oct. 30 that the  Old-Age, Survivors, and Disability Insurance (OASDI), or Social Security,  taxable wage base for 2014 increases to $117,000. This is an increase  of $3,300, from $113,700 in 2013, .

Thus, the maximum 2014 Social Security tax payable by each employee is $7,254, or 6.2 percent of that maximum wage base. This results in a $204.60 tax increase from 2013 for both the employee who qualifies and their employer as employers must match the employee amount with an equal contribution.

Of the approximately 165 million workers who currently pay Social Security taxes , the SSA estimates that 10 million of those workers will pay higher social security taxes because of the higher taxable wage base. Note this will also result in increased FICA taxes paid by the employers of those employees.

The Advi$or notes that the Social Security wage base in 2004 was $87,900 resulting in a maximum tax paid of $5,449.80.  Thus the current maximum tax indicates a 33% tax increase from 10 years ago, 10 points higher than the cumulative inflation rate for the same period.

For the Medicare portion of the FICA taxes, there is no wage base and all wages earned are subject to the Medicare tax, which also is paid by employers and employees. Each pays at a 1.45 percent rate on all wages earned, although some employees will pay an additional 0.9 percent on wages greater than $200,000 ($250,000 for Married filers) as per the new statutes under the Affordable Care Act that went into affect in 2013.

The Nanny Tax Wage Base:

The Social Security Administration has also announced that for 2014, wages paid by an individual for domestic services in the homeowner’s private home isn’t FICA wages, and thus not subject to FICA taxes, if the amount paid during the year is less than $1,900. This amount is up from $1,800 for 2013.  (This is often referred to as the Nanny Tax.) Thus wages paid to an individual working in the home in excess of $1,900 must be treated as an employer/employee relationship and reported accordingly. As the Advi$or has noted in the past, remuneration paid in excess of $600 must be reported on a 1099 at minimum.

 

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