With the Social Social Administration (SSA) announcing a 1.5 percent cost of living adjustment (COLA) for 2014 the following changes to your social security taxes and income will result. All changes will take effect in January 2014.
Social Security Item
|Maximum taxable earnings (wage base) subject to social security taxes||$117,000||$113,700|
|Maximum social security benefit||$2,533/mo||$2,642/mo|
|Estimated average monthly social security benefit||$1,275||$1,294|
|Self-Employed social security tax rate||15.30%||15.30%|
|Employee social security tax rate (deducted from your paycheck)||7.65%||7.65%|
The social security tax rate above is the combined rate for Social Security and Medicare. For employees the employer pays half the social security tax, whereas for self employed they have to pay both the employee and employer components and hence the higher tax rate.
Once a worker passes the maximum taxable earnings (or social security wage base) then all earnings above that amount are NOT subject to social security taxes.