Social Security Administration Sets Social Security Wage Base, Cost-of-Living Adjustment for 2022
The Social Security Administration (SSA) recently announced the maximum amount of an individual's taxable earnings in 2022 subject to Social Security tax, as well as a cost-of-living adjustment (COLA).
The maximum amount of an individual’s taxable earnings in 2022 subject to the old age, survivors and disability insurance (OASDI), or Social Security, tax - will be $147,000, an increase from $142,800 for 2021. The OASDI tax rate is 6.2 percent, so an employee with total wages from an employer at or above the maximum in 2022 will pay $9,114 in tax, with the employer paying an equal amount.
The Medicare hospital insurance tax of 1.45 percent each for employees and employers has no wage limit and will be unchanged for 2022. 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 percent of wages with respect to employment. This will also be unchanged for 2022.
Self-employed individuals pay self-employment tax equal to the combined OASDI and Medicare taxes for both employees and employers, 15.3 percent, up to the OASDI wage base and 2.9 percent in Medicare taxes on net self-employment income above it, with an offsetting above-the-line income tax deduction of half of the OASDI-equivalent component of self-employment tax.
The annual amount that retirees receiving Social Security benefits can earn in the year they reach full retirement age before their benefits are reduced will be $51,960 for 2022. This is an increase from $50,520 in 2021. The maximum Social Security benefit for a worker retiring at full retirement age will increase to $3,345 per month in 2022, up from $3,148 per month in 2021. Beneficiaries younger than full retirement age will be able to earn up to $19,560 in 2022, an increase from $18,960 in 2021.
The recently announced COLA of 5.9 percent will be applicable to Social Security benefits payable in 2022 and is based on an increase in the consumer price index from the third quarter of 2021. The COLA increase for 2021 was 1.3 percent.
Read the full announcement from the SSA.