Tax Time - Again!
Tax on Wages
Now that we are in the last quarter of 2023, we know we are approaching the year end and thus the filing of our annual, personal income tax returns.
(The income tax rates for 2024 on the Federal level have been covered in a separate Tip. The discussion that follows covers the social security taxes.)
With this filing arriving, soon, it is interesting to note a few changes on the upcoming wage base for social security taxes.
The IRS has released new information on the changes in tax rates for this wage base.
Social Security issued an update as to the Social Security’s Old-Age, Survivors, and Disability Insurance (OASDI) program limits as to earnings that impact the tax rates in this area.
Under OASDI, the tax rate for wages in 2024 is, per the statute, 6.2% for the employer and 6.2% for the employee. The wages for 2024 that are taxed for this rule will be $168,600, the top or base amount for earnings under this rule. This results in a tax, on the high side, of $10,453.20 for the employee and the same amount for the employer. (If one is dealing with self-employment, the rate in 2024 is 12.4%).
In addition to the above taxes, there is also the Medicare Hospital Insurance (HI), which uses a wage base without limit. The rate is 1.45% for the employee and the same rate for the employer. Of course, the self-employed person simply pays this combined rate of 2.9%.
Thus, this total of 12.4 and 2.9 continues, with a total of 15.3%. However, as noted, the wage base for some workers on the higher side of the earning scale is increased in 2024.
Dr. Mark Lee Levine