2021 Wage Base Rises for Social Security Payroll Taxes

Starting Jan. 1, 2021, the maximum earnings subject to the Social Security payroll tax will increase by $5,100 to $142,800—up from the $137,700 maximum for 2020, the Social Security Administration (SSA) announced Oct. 13. The SSA also posted a fact sheet summarizing the 2021 changes.

The taxable wage base cap is subject to an automatic cost-of-living adjustment (COLA) each year based on increases in the national average wage index, calculated annually by the SSA.

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The maximum 2021 Social Security component of the Federal Insurance Contributions Act tax payable by each employee is $8,853.60, which is 6.2% of the taxable wage base, up from $8,537.40 for 2020. Employers match the employee amount with an equal contribution.

The Medicare (Hospital Insurance) tax rate remains 1.45% and is applicable to all wages paid during the year. An additional Medicare tax of 0.9% applies to individuals with annual earned income of more than $200,000, and $250,000 for married couples filing jointly, the agency said. While employers are required to pay a matching 1.45% portion of the standard Medicare tax, employers are not required to pay a matching 0.9% portion of the additional Medicare tax.

For 2021, an employee who earns exactly $142,800 is subject to a total FICA tax (Social Security tax plus Medicare tax) of $10,924.20 ($8,853.60 + $2,070.60), up from $10,534.05 for 2020.

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