Social Security Wage Base, COLA Set for 2024
The Social Security Administration (SSA) recently announced that individual taxable earnings of up to $168,600 annually will be subject to Social Security tax in 2024. The updated amount is an increase from $160,200 in 2023.
This amount is the wage base limit that applies to earnings subject to the 6.2% OASDI tax (old age, survivors and disability insurance). At or above the wage base limit, employees and employers will each pay $10,453 in tax, an increase of $521 for each.
The Medicare hospital insurance tax of 1.45% each for employees and employers has no wage limit and remains unchanged for 2024. Individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly and $125,000 for married taxpayers filing separately) pay an added hospital insurance tax under Sec. 3103(b)(2) of 0.9% of wages with respect to employment. This is also unchanged for 2024.
The self-employed pay self-employment tax equal to the combined OASDI and Medicare taxes for both employees and employers, 12.4% of net self-employment income up to the OASDI wage base plus 2.9% in Medicare taxes on any amount of net self-employment income, with an offsetting above-the-line income tax deduction of half of the self-employment tax. This is also unchanged.
Additionally, the SSA announced a cost-of-living adjustment (COLA) of 3.2% for both Social Security and Supplemental Security Income (SSI) benefits beginning in January 2024. COLA rose 8.7% a year ago and is based on the consumer price index.
Retirees receiving Social Security benefits will be able to earn $59,520 in the year they reach full retirement age before their benefits are reduced by $1 for every $3 in earnings over the limit in 2024. This amount is up by $3,000 from 2023.
Beneficiaries younger than full retirement age can earn up to $22,320 in 2024 before their benefits are reduced by $1 for every $2 in earnings over the limit. This amount is up from $21,240 in 2023.
The maximum Social Security benefit for a worker retiring at full retirement age will increase to $3,822 per month in 2024. In 2023, this amount was $3,627 per month.