The Social Security Administration has announced that the wage base for computing Social Security tax will be $113,700 for 2013 (an increase from $110,100 in 2012). Additionally, cost-of-living adjustment (COLA) increases have been released for Social Security benefits.
SS Wage Base Increases for 2013
The Social Security Wage Base is the maximum amount of wages (or self-employment earnings) on which Social Security tax (or self-employment tax) is collected. The wage base’s increase for 2013 represents a 3.27% rise from 2012. Reflecting the new wage base, the tax rates and the maximum tax amounts will be as follows:
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* Does not include basic Medicare tax or the new 0.9% additional Medicare tax on high earners.
2013 Social Security Benefit COLAs
Social Security and Social Security Income (SSI) beneficiaries will receive a cost of living adjustment based on the annual increase in the Consumer Price Index. For 2013, this increase will be 1.7%.
For example, for all retired workers, the estimated average monthly Social Security benefit amount payable starting in January 2013 will be $1,261 (an increase from $1,240 before computing the 1.7% COLA).
Retirement Earnings Test
An individual under full retirement age may have $1 in Social Security benefits withheld for every $2 earned above an exempt amount. For 2013, the annual exempt amount will be $15,120, up from $14,640 in 2012.
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We can assist you with understanding how the increased Social Security Wage Base, COLA increases, and increased earnings test exempt amount may affect your overall tax planning. Contact us today.