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Social Security Wage Base, COLA Set for 2024

Home Tax UpdatesSocial Security Wage Base, COLA Set for 2024

Social Security Wage Base, COLA Set for 2024

November 30, 2023 Posted by Victoria Bogdanovich Tax Updates

Individual taxable earnings of up to $168,600 annually will be subject to Social Security tax in 2024, the Social Security Administration (SSA) announced Thursday.

The amount, an increase from $160,200 in 2023, is the wage base limit that applies to earnings subject to the 6.2% OASDI tax (old age, survivors, and disability insurance). At or above the wage base limit, the employee and the employer each will pay $10,453 in tax, an increase of $521 for each party in 2024.

The Medicare hospital insurance tax of 1.45% each for employees and employers remained unchanged for 2024 (it has no wage limit). Individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly and $125,000 for married taxpayers filing separately) pay an additional hospital insurance tax under Sec. 3103(b)(2) of 0.9% of wages with respect to employment (also unchanged).

Self-employed individuals pay self-employment tax equal to the combined OASDI and Medicare taxes for both employees and employers (i.e., 12.4% of net self-employment income up to the OASDI wage base plus 2.9% in Medicare taxes on any amount of net self-employment income, with an offsetting above-the-line income tax deduction of half of the self-employment tax (also unchanged)).

The SSA also announced Thursday a cost-of-living adjustment (COLA) of 3.2% for both Social Security and Supplemental Security Income (SSI) benefits beginning in January 2024. COLA, which is based on the consumer price index, rose 8.7% a year ago.

In 2024, retirees receiving Social Security benefits will be able to earn $59,520 in the year they reach full retirement age before their benefits are reduced by $1 for every $3 in earnings over the limit. That figure is an increase of $3,000 from 2023.

Beneficiaries younger than full retirement age can earn up to $22,320 in 2024 before their benefits are reduced by $1 for every $2 in excess earnings, up from $21,240 in 2023.

The maximum Social Security benefit for a worker retiring at full retirement age will increase to $3,822 per month in 2024 from $3,627 in 2023.

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