The Social Security Administration has projected an increase in the Social Security wage base for 2014. The wage base is the amount up to which employees and employers are required to withhold 6.2% for Old Age, Survivors and Disability Insurance (OASDI). The wage base is expected to increase from $113,700 in 2013 to $115,500 in 2014. In 2005, the wage base was $87,900. Indeed, the increase has been substantial and rapid!
The Hospital Insurance (HI) tax of 1.45% for each employee and employer, has no wage limit. All earned wages are subject to HI tax withholding at 1.45% for the employee and the employer matches 1.45%. Important to remember for 2013, a 0.9% Medicare tax applies to all wages that exceed $200,000 ($250,000 for joint returns and $125,000 for married filing separately).
For self-employed taxpayers, the self-employment tax rate continues at 15.3%, 12.4% for OASDI up to the wage base and 2.9% for HI without a limitation. So, if you are self-employed and earn over $113,700 in 2013 from your business, you will stop paying the 12.4% on income over the $113,700 cap. The 0.9% Medicare tax applies to self-employment income over $200,000 ($250,000 for joint returns and $125,000 for married filing separately).