Recently, the Social Security Administration announced that the wage base for computing Social Security tax will increase to $168,600 for 2024, which is up from $160,200 for 2023. Earnings exceeding this threshold, either from wages or self-employment, are exempt from Social Security tax.

Basic Details 

The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees, and self-employed workers — one for Old Age, Survivors, and Disability Insurance, which is commonly known as the Social Security tax, and the other for Hospital Insurance, which is commonly known as the Medicare tax.

There’s a maximum amount of compensation subject to the Social Security tax, but no maximum for Medicare tax. For 2024, the FICA tax rate for employers will be 7.65% — 6.2% for Social Security and 1.45% for Medicare (the same as in 2023).

2024 Updates

For 2024, an employee will pay:

• 2% Social Security tax on the first $168,600 of wages (6.2% x $168,600 makes the maximum tax $10,453.20), plus
• 45% Medicare tax on the first $200,000 of wages ($250,000 for joint returns, $125,000 for married taxpayers filing separate returns), plus
• 35% Medicare tax (regular 1.45% Medicare tax plus 0.9% additional Medicare tax) on all wages in excess of $200,000 ($250,000 for joint returns, $125,000 for married taxpayers filing separate returns)

 
For 2024, the self-employment tax imposed on self-employed people will be:

• 4% Social Security tax on the first $168,600 of self-employment income, for a maximum tax of $20,906.40 (12.4% x $168,600), plus
• 90% Medicare tax on the first $200,000 of self-employment income ($250,000 of combined self-employment income on a joint return, $125,000 on a return of a married individual filing separately), plus
• 8% (2.90% regular Medicare tax plus 0.9% additional Medicare tax) on all self-employment income in excess of $200,000 ($250,000 of combined self-employment income on a joint return, $125,000 for married taxpayers filing separate returns)

Employees With More Than One Employer

You may have questions if an employee who works for your business has a second job. That employee would have taxes withheld from two different employers. Can the employee ask you to stop withholding Social Security tax once they reach the wage base threshold? The answer is no. Each employer must withhold Social Security taxes from the individual’s wages, even if the combined withholding exceeds the maximum amount that can be imposed for the year. Fortunately, the employee will get a credit on their tax return for any excess withheld.

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Do you have questions about payroll tax filing or payments? Contact us. We’ll help ensure you stay in compliance.