The Old-Age, Survivors, and Disability Insurance taxable wage base is to increase to $137,700 in 2020, up from $132,900 for 2019, the Social Security Administration said Oct. 10 in a news release.
The maximum 2020 OASDI portion of the Federal Insurance Contributions Act tax payable by each employee is $8,537.40 or 6.2% of the wage base, up from $8,239.80. Employers match the employee amount with an equal contribution. The Medicare or Hospital Insurance tax rate remains 1.45% and is applicable to all wages paid during the year. An additional 0.9% in Medicare taxes applies to individuals with annual earned income of more than $200,000, and $250,000 for married couples filing jointly, the agency said.
The 2020 increase is $900 more than the projection the SSA made in April, a rise to at least $136,800.
For 2020, an employee who earns $137,700 is subject to a total FICA tax of $10,534.05 ($8,537.40 + $1,996.65).
Employees are to earn one credit for each $1,410 of earnings paid in 2020, up from $1,360, the SSA said. 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 $48,600 in 2020, up from $46,920 in 2019, the SSA said. The earnings limit applies only to workers who retire in the year they reach retirement age.
After earnings reach the 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 $18,240, compared with $17,640 in 2019, the SSA said.
One dollar in benefits is to be withheld for every $2 in earnings that exceed the limit, the SSA said. The SSA also said a cost-of-living increase of 1.6% is to take effect for 2020, compared with 2.8% for 2019, affecting several thresholds for benefits and coverage.