The 2022 Social Security wage base and benefits increase (Cost of Living Adjustment-COLA) was released by the Social Security Administration on October 13, 2021
For 2022, taxable earnings up to a maximum of $147,000 are subject to Social Security tax, officially called old age, survivors, and disability insurance (OASDI) tax; you may also know this as FICA. For 2021, the maximum wage limit was $142,800; therefore, the new 2022 maximum wage limits equate to an increase of $260.40 in tax for both the employer and employee.
The Medicare hospital insurance tax of 1.45% for employers and employees remains unchanged with no maximum wage limit. Also unchanged is the 0.9% of wages for the additional Medicare hospital insurance tax for those individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly and $125,000 for married taxpayers filing separately).
As a reminder, self-employed individuals pay the combined FICA and Medicare taxes as the employer and the employee, with a corresponding tax deduction from their taxable income for the employer portion of the tax.
The Social Security Administration also announced the COLA for those receiving Social Security benefits will increase by 5.9% for 2022, compared to the 1.3% increase for 2021.
We realize some of these taxes were suggested to be changed by the Administration; however, at this time, there is no clear indication of the final changes until the Infrastructure and Reconciliation bills are negotiated, voted on, passed, and signed into law. As of the latest AICPA Town Hall webinar attended on Thursday, October 7, 2021, a projected time frame for finalizing the tax and spending bills appears to be headed for December 2021.
We continue to keep abreast of the information released from the various committees and representatives in DC; however, at this time, the final tax and estate changes are not final. Please know, we are staying on top of the proposed changes, and as soon as we have more concrete information, we will be sending information to our clients.
