On October 30, 2013, the Social Security Administration announced an upward cost-of-living adjustment for the Social Security taxable wage limit. For calendar year 2014, the amount of earnings taxable for Social Security (Old Age, Survivors and Disability Insurance, or “OASDI”) will also increase from $113,700 to $117,000. The employee and employer tax rate will remain unchanged at 6.2%. With this increase in taxable wages, the maximum Social Security tax payable by an employee will be $7,254.00, an increase of $204.60 from the current maximum tax of $7,049.40. Employers will match the employee’s tax.
In 1993, the Omnibus Budget Reconciliation Act removed the taxable wage limit for the Medicare tax beginning in 1994 and years thereafter. Therefore, there is no maximum employee or employer contribution amount for Medicare tax for 2014. All covered wages will be subject to Medicare tax at a rate of 1.45%. Employers will match the employee’s tax.
As of January 2013, individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly, $125,000 for married couples filing separately, and $200,000 for filing single) pay an additional 0.9% in Medicare taxes. For withholding tax purposes, covered wages in excess of $200,000 will be taxed at a rate of 2.35% (1.45% + 0.9%), regardless of filing status. The Additional Medicare Tax is not matched by employers.
Depending on the amount of taxable wages, the combined Social Security and Medicare employee tax rate will range from 7.65% (6.20% + 1.45%) to 8.55% (6.2% + 1.45% + 0.9% on Medicare wages in excess of $200,000 if the employee is a high-income earner). The combined employer rate will remain 7.65%.
For a copy of the Social Security Fact Sheet with the 2014 changes please click here.
ADP Compliance Resources
ADP maintains a staff of dedicated professionals who carefully monitor federal and state legislative and regulatory measures affecting employment-related human resource, payroll, tax and benefits administration, and help ensure that ADP systems are updated as relevant laws evolve. For the latest on how federal and state tax law changes may impact your business, visit the ADP Eye on Washington Web page located at www.adp.com/regulatorynews.
ADP is committed to assisting businesses with increased compliance requirements resulting from rapidly evolving legislation. Our goal is to help minimize your administrative burden across the entire spectrum of employment-related payroll, tax, HR and benefits, so that you can focus on running your business. This information is provided as a courtesy to assist in your understanding of the impact of certain regulatory requirements and should not be construed as tax or legal advice. Such information is by nature subject to revision and may not be the most current information available. ADP encourages readers to consult with appropriate legal and/or tax advisors. Please be advised that calls to and from ADP may be monitored or recorded.
If you have any questions regarding our services, please call 855-466-0790.
1 ADP Boulevard
Roseland, NJ 07068
The ADP logo, ADP, and In the Business of Your Success are registered trademarks of ADP, Inc.
Last updated: November 4, 2013
Download a PDF version of this article here.