The Social Security (Old-Age, Survivors, and Disability Insurance) taxable wage base is to increase to $147,000 for 2022, up from $142,800 for 2021, the Social Security Administration announced October 11, 2021.
The maximum 2022 Social Security component of the Federal Insurance Contributions Act tax payable by each employee is $9,114, which is 6.20% of the taxable wage base, up from $8,853.60 for 2021. 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 0.90% applies to individuals with annual earned income of more than $200,000, and $250,000 for married couples filing jointly. While employers are required to pay a matching 1.45% portion of the standard Medicare tax, employers are not required to pay a matching 0.90% portion of the additional Medicare tax.
For 2022, an employee who earns exactly $147,000 is subject to a total FICA tax (Social Security tax plus Medicare tax) of $11,245.50 ($9,114 + $2,131.50), up from $10,924.20 for 2021.
Employees are to earn one credit for each $1,510 of earnings paid in 2022, up from $1,470 in 2021. Employees may earn a maximum of four credits in a year. Those who receive the maximum wages taxable under Social Security in any year also receive four coverage credits. Employees must be credited with a certain amount of work earned under Social Security to qualify for benefits.
The Social Security earnings limit for workers who reach full retirement age increases to $51,960 in 2022, up from $50.520 in 2021. The earnings limit applies only to workers who retire in the year they reach retirement age. After earnings reach this limit, $1 in benefits is withheld for every $3 in earnings exceeding the limit only in those months preceding the month full retirement age is reached. There is no limit on earnings from the full retirement-age month and later.
The earnings limit for workers who retire before reaching full retirement age increases to $19,560 in 2022, compared with $18,960 in 2021. One dollar in benefits is to be withheld for every $2 in earnings that exceed this limit.
The SSA also said a cost-of-living increase of 5.90% is to take effect for 2022, compared with 1.30% in 2021, affecting several thresholds for benefits and coverage.
As always, we will continue to monitor this situation and provide updates as they become available. If there are any questions please do not hesitate to contact us or visit our website for the latest news and updates.