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.
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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