We’d like to inform you about a few updates for the year 2024 that could impact your financial situation.
Social Security Tax
In 2024, individual taxable earnings up to $168,600 annually will be subject to Social Security tax, marking an increase from $160,200 in 2023. This adjustment impacts the wage base limit for the 6.2% OASDI tax, which means that both employees and employers will pay $10,453 in tax on earnings at or above this limit, an increase of $521 for each party in 2024.
Medicare Tax
The Medicare tax of 1.45% for both employees and employers remains unchanged for 2024, with no wage limit. For high earners, those with income exceeding $200,000 (or $250,000 for married couples filing jointly and $125,000 for married taxpayers filing separately), an additional Medicare tax of 0.9% applies.
Self-Employment Tax
Self-employed individuals will continue to pay self-employment tax, which combines the Social Security and Medicare taxes, totaling 12.4% of net self-employment income up to the Social Security wage base. An additional 2.9% in Medicare taxes applies to any amount of net self-employment income.
Cost-of-Living Adjustment (COLA)
The Social Security Administration announced a 3.2% COLA for both Social Security and Supplemental Security Income (SSI) benefits beginning in January 2024. This COLA is based on the consumer price index and reflects an increase from the previous year’s 8.7%.
Earnings Limits for Retirees
In 2024, retirees receiving Social Security benefits will be able to earn up to $59,520 in the year they reach full retirement age before their benefits are reduced by $1 for every $3 in excess earnings, 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.
We encourage you to take these updates into consideration when planning your finances for the upcoming year. If you have any questions or need assistance with tax planning, please don’t hesitate to reach out to us.
