The Social Security Administration (SSA) has announced that the maximum earnings subject to Social Security tax (Social Security wage base) will increase from $147,000 to $160,200 in 2023 (an increase of $13,200). The maximum Social Security employer contribution will increase $818.40 in 2023. (SSA Press Release, 10/13/2022)
For 2023, the FICA tax rate for both employers and employees is 7.65% (6.2% for OASDI and 1.45% for Medicare).
For 2023, an employer must withhold:
- 6.2% Social Security tax on the first $160,200 of employee wages (maximum tax is $9,932.40; i.e., 6.20% × $160,200), plus;
- 1.45% Medicare tax on the first $200,000 of employee wages, plus;
- 2.35% Medicare tax (regular 1.45% Medicare tax + 0.9% additional Medicare tax) on all employee wages in excess of $200,000.
Social Security and Supplemental Security Income (SSI) benefits will increase by 8.7% in 2023. The average monthly Social Security benefit will increase from $1,681 to $1,827, and the maximum federal SSI monthly payment to an individual will increase from $841 to $914. The maximum federal SSI monthly payment to a couple will increase from $1,261 to $1,371 in 2023. The amount of earnings that is required in order to be credited with a quarter of Social Security coverage will increase from $1,510 to $1,640.
The retirement earnings test remains in effect for individuals below normal retirement age (age 65 to 67, depending on year of birth) who continue to work while collecting Social Security benefits. For affected individuals, $1 in benefits will be withheld for every $2 in earnings above $21,240 in 2023 (up from $19,560 in 2022). For working individuals collecting benefits who reach normal retirement age (NRA) in 2023, $1 in benefits will be withheld for every $3 in earnings above $56,520 (up from $51,960 in 2022), until the month that the individual reaches NRA. After that month, there is no limit on earnings.
The SSA has a 2023 Fact Sheet on the changes.
For more information on the Social Security wage base, see Checkpoint’s Federal Tax Coordinator ¶A-6035.
Get all the latest tax, accounting, audit, and corporate finance news with Checkpoint Edge. Sign up for a free 7-day trial today.