Social Security Maximum to Increase in 2009 - Is Your Payroll Software Ready?
This post has been revised to correct mis-statements (see comments).
As in past years, the maximum Social Security (OASDI) withholding amount will increase in 2009. The maximum earnings subject to OASDI withholding in 2008 is $102,000; the 2009 maximum earningswill be $106,800. The tax rates for employees and self-employed individuals will remain the same, at 7.65 percent for employees and employers, and 15.3% for self-employed. This is a combined amount for both OASDI and Medicare. The OASDI portion, 6.2%, is taken out on earnings up to $106,800; there is no maximum earnings for the Medicare portion.
If you have high income employees, you should have a payroll processing system that stops the deductions for OASDI at the maximum; the Medicare deductions have no maximum and continue throughout the year.
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As currently written, this article is incorrect.
It states that the maximum OASDI withholding amount is $102,000 in 2008 and $106,500 in 2009.
In fact, those are the wage levels on which the maximum amounts are based.
The maximum withholding amount is 6.2%, which comes out to $6,324 in 2008 and $6,603 in 2009.
A person would have to earn over $1.6 million to contribute $102,000 in OASDI.
Thanks very much for the clarification. You are correct that $106,500 is not the maximum withholding amount, but is the amount on which withholding is based.
Is the maximum deduction per company or per year? I already reached the maximum with my former employer (severance, etc, not that highly compensated!). I recently started a new job and they are withholding OASDI from my checks. When I questioned it they said it is per company. That doesn’t make sense to me as a taxpayer. I already paid enough regardless of whether I change companies or not. Thanks
Good question, Gina. Your employer is correct that each employer withholds up to the maximum amount for the year. You are entitled to a refund on the excess that was withheld from you. If you want, you could reduce your federal income tax withholding on Form W-4
to make up for some of this excess. Anything withheld for Social Security over $6621.60 should be refunded to you.
I think this double withholding is because one employer won’t be able to verify what you had withheld from your previous employer.
Is there any relief in sight for them to stop raising this every year? Considering I will likely see only a portion of this, if any, I am really tired of throwing my hard earned money down the drain. Each year they increase my payment and extend my deductions to later in the year until I reach the max. I work too many extra hours to just throw away money, and this at least is one item that comes back to me. The rest of my contributions are given to people that don’t work and take my tax dollars to buy expensive food without looking at the price so they can use their money to buy shoes, jewelry and watch cable tv. The kids at school on assistance have nicer shoes than my kids and it is not right. Okay, got off track there but I am sick of the government taking my money.
David…
Sorry to hear that as your income which must be over 100k/yr has caused you to pay an additional couple/few hundred dollars a year in social security taxes.
Perhaps if you have parents, uncles/aunts or retired friends who are drawing social security checks could kick back some of the cost of living increases they got this past year. This could offset some of your increased taxes and afford you some extra cash to pick up some nicer shoes — that apparently are purchased with social security income.
sorry david. This is socialism for you. Basically they take your hard earned money and give it to others. The only “legal” solution is to make less $ and try suck that money back from the system.
David sorry that your kids don’t have nicer shoes, but I don’t feel sorry for anyone making over the maximum taxable amount for social security (as do I). You should learn to manage your money better, appreciate what you do have, understand that you, too will collect Social Security someday, and learn to relax. (By the way, how do you know which kids are on assistance and which ones aren’t? Are you generalizing by skin color or what???)
David, that’s why they call SS the ‘3rd rail of politics’; you touch it you get quite a shock.
Gina, the deduction max is by company. If you change employers the Fica deduction restarts at 0.00 You will receive a tax credit when you file your income taxes if you paid more than the maximum.
David
I feel you. I guess I should feel lucky for all the hard work that I have poured into creating a career, paying my own way through college and working several jobs to earn 100k. What were we thinking? Now we are brow beated by some one who is tormented by some inner feelings of guilt. Just priceless. Hey Z was it your idea to have the Empire State Building light up to celebrate the birthday of communism in China today?
100K earner, you hit the nail on the head. When this country starts to value hard work again maybe we have a chance.
100K, don’t worry about the next 3 years. Obama promised to not raise your taxes. Oh wait, he also said he would redistribute the wealth. Fortunately, his socialistic ideas haven’t been enacted and he’s been a Jimmy Carter so far.
C’mon now DB, Carter didn’t with the Nobel prize until 22 years AFTER he did nothing for the nation.
Well, guess what? Maximum withholding for 2010 will remain at the 2009 levels. David’s dream of having ~$300 less taken from his $100,000+ income will be realized.
This is all related to the 2010 COLA of zero for Social Security recipients, which, by law, means that maximum withholding cannot be increased. You see, they are tied together.
Would anyone care to explain how to pay for future COLA increases without increasing maximum witholding? Some sort of magical economic formula where you can lower tax rates yet increase spending?
Oh yeah; been there, done that. Doesn’t work.
I too make well over the Social Security maximum, but unlike some of you, I completely resent the steep yearly increases in the cap level. Because I make good money, I live in a good house, which demands a good mortgage payment. And why shouldn’t I? People who earn far less apparently feel that since they live in an apartment complex, so too should the rest of us, and if we decide to live better, then ha! Nail us to the tax wall!
Gov. needs to create another maximum withholding tier – for example $225K up at 7% and $400K up at 7.5% so all pay in the correct proportion. The middle class are pulling more then their share and the very wealth hide…. not right….
@ Oscar – I don’t agree and I am very middle class. A percentage of earnings is a percentage of earnings. There should be a flat tax rate…say 30%. If I make 1000 I pay 300. If I make 1,000,000, I pay 300,000. That is fair and the same should go for social security withholdings. If I want to keep more money I make more money. The more rich folks keep, the more they spend. If your employer cut your salary by 10% what would you do? Decrease spending of course. You’d tighten your belt as it were. The rich do the same. If the administration takes 10% of their income they spend less.
@ Z – I’m not even sure what to say to that. We all have a right to keep as much of what we earn as we can.
@ Middling – Don’t assume racism where it may or may not be. There is enough real racism out there you can fight against.
I’d rather have all my contributions to Social Security back with nominal interest to rollover into an IRA/401k, rather than keep paying into a system for people to lame to even attempt to save. Helping the poor is fine, enabling them and cultivating the expectation that the gov’t is there to take care of them… the time for that thinking is OVER !!