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Social Security Wage Base Increases to $142,800 for 2021

The Social Security Administration (SSA) announced on Tuesday, October 13 that the 2021 social security wage base will be $142,800, which is an increase of $5,100 from $137,700 in 2020 (view the SSA Fact Sheet). As in prior years, there is no limit to the wages subject to the Medicare tax; therefore all covered wages are still subject to the 1.45% tax. As in 2020, wages paid in excess of $200,000 in 2021 will be subject to an extra 0.9% Medicare tax that will be withheld only from employees’ wages. Employers will not pay the extra tax.

 

The FICA tax rate, which is the combined social security tax rate of 6.2% and the Medicare tax rate of 1.45%, will be 7.65% for 2021 up to the social security wage base. The maximum social security tax employees and employers will each pay in 2021 is $8,853.60, an increase of $316.20 from $8,537.40 in 2020.

 

The social security wage base for self-employed individuals in 2021 will also be $142,800. There is no limit on covered self-employment income that will be subject to the Medicare tax. The self-employment tax rate will be 15.3% (combined social security tax rate of 12.4% and Medicare tax rate of 2.9%) up to the social security wage base. In 2021, the maximum social security tax for a self-employed individual will be $17,707.20.

 

FICA coverage threshold for domestic, election workers

The threshold for coverage under social security and Medicare for domestic employees (i.e., the “Nanny tax”) will be $2,300 in 2021, up from $2,200 in 2020; the coverage threshold for election workers will be $2,000 in 2021, up from $1,900 in 2020.