Social Security Wage Base to Increase in 2017
After holding at $118,500 for 2016 and 2015, the Social Security Administration (SSA) has announced that the maximum amount of earnings subject to Old-Age, Survivors and Disability Insurance (OASDI) Social Security tax will rise to $127,200 in 2017. The SSA cost-of-living adjustments (COLAs) are based on the rise in the average Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of 2015 through the third quarter of 2016.
Further, for the year in which an individual attains full retirement age, the retirement earnings test exempt amount increases to $44,880 for 2017. The test applies to earnings from the months prior to when the individual reaches full retirement age. One dollar in benefits will be withheld for every three dollars in earnings above the limit. No limit will be imposed beginning in the month in which the individual reaches full retirement age. For retirees under the full retirement age, the retirement savings test exempt amount will increase to $16,920 for 2017, with one dollar withheld for every two dollars in earnings above the limit.
In addition, if a taxpayer pays above a certain amount to a person that works in their home, they will owe the so-called “Nanny tax.” For 2017, the domestic employee coverage threshold, or the amount at which the “Nanny tax” will kick in, is $2,000, which is the same as the 2016 threshold. Earnings of any domestic employee are not subject to Social Security taxes if they do not exceed that threshold for the year.