2015 Social Security Wage Base Increased to $118,500

According to the Social Security Administration, on average, total wages have increased in the past year. Because of this, the Old Age, Survivors and Disability Insurance tax (OASDI), more commonly known as Social Security tax, will have an increased wage base to use when calculating tax for 2015. The wage base was $117,000 in 2014, and will increase to $118,500 in 2015.

OASDI is one of two taxes enforced upon employers/employees/self-employed workers under the Federal Insurance Contributions Act, or FICA. The other tax is for Hospital Insurance (HI), or Medicare tax. The combined tax rate remains unchanged from 2014 and will total 7.65 percent in 2015, with 6.2 percent allocated to Social Security and 1.45 percent going towards Medicare tax.

Employees will pay the 6.2 percent Social Security tax on the first $118,500 of their wages, with a maximum tax of $7,347. In addition, they will pay 1.45 percent Medicare tax on the first $200,000 of wages, plus, 2.35 percent Medicare tax (comprised of the 1.45 percent Medicare tax and the additional .9 percent Medicare surtax) on all wages above $200,000. The Medicare $200,000 limitation threshold increases to $250,000 if filing jointly, and decreases to $125,000 if married but filing separately.

Employers will pay the 6.2 percent Social Security tax on the first $118,500 of an employee's wages and 1.45 percent Medicare tax on all wages; there is no limiting amount for calculating the Medicare tax amount.

The tax burden is greater on those who are self-employed. The first $118,500 of self-employment income will be taxed at a rate of 12.4 percent for Social Security tax, with a maximum tax of $14,694. Medicare tax will be 2.90 percent on the first $200,000 of self-employment income, and 3.8 percent (2.9 percent regular Medicare tax plus the additional .9 percent Medicare surtax) on all income beyond $200,000. Again, the Medicare $200,000 limitation number increases to $250,000 of combined self-employment income on a joint return, and decreases to $125,000 if married but filing separately.

Please contact your Eide Bailly service provider or visit our website to learn more.

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