Social Security Wage Base, COLA Set for 2023
The Social Security Administration (SSA) recently announced that individual taxable earnings of up to $160,200 annually will be subject to the old age, survivors and disability insurance (OASDI) tax in 2023. The updated amount is an increase from $147,000 in 2022.
Employees and employers will each pay $9,932 at the OASDI tax rate of 6.2% in 2023. The Medicare hospital insurance tax of 1.45% each for employees and employers has no wage limit and is unchanged for 2023.
Individuals earning over $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 2023.
The self-employed pay 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 the self-employment tax.
In addition, the SSA announced a cost-of-living adjustment (COLA) of 8.7% for both Social Security and Supplemental Security Income (SSI) benefits starting in January 2023. This is an increase from 5.9% in 2022.
Retirees receiving Social Security benefits will be able to earn $56,520 in the year they reach full retirement age before their benefits are reduced by $1 for every $3 in earnings over the limit in 2023. This amount is up from $51,960 in 2022.
Beneficiaries younger than full retirement age can earn up to $21,240 in 2023 before their benefits are reduced by $1 for every $2 in earnings over the limit. This amount is up from $19,560 in 2022.
The maximum Social Security benefit for a worker retiring at full retirement age will increase to $3,627 per month in 2023. In 2022, this amount was $3,345 per month.