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Jean   Murray

Social Security Tax Maximum to Increase in 2013 - Payroll Tax Cut Set to Expire

By October 22, 2012

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Almost every year brings changes to Social Security benefits. And along with these benefit changes come changes in Social Security taxes. The Social Security Administration (SSA) has announced these changes for 2013:

  • Monthly Social Security benefits will increase 1.7 percent starting January 2013.
  • The maximum earnings subject to Social Security (OASDI)  tax will increase to $113,700 in 2013, from $110,100 in 2012. The SSA says nearly 10 million workers will pay more FICA tax (Social Security and Medicare) as a result of this increase.

What Does This Mean to My Business?

Payroll tax calculations will need to be changed starting January 1, 2013, to stop the Social Security portion of an employee's FICA deduction when the employee's pay for the year reaches $113,700, the Social Security maximum. There is no maximum on the Medicare deduction; all wages are subject to Medicare tax.

How Do I Calculate FICA taxes?

Employers and employees must each contribute to FICA taxes (Social Security and Medicare), for a combined total payment of 15.3%.  The Social Security amount (called OASDI) is 6.2% of gross pay (4.2% currently, with the payroll tax cut), while the Medicare amount is 1.45%.

Are Social Security Taxes for Self-Employed Individuals Also Capped?

If you are self-employed, you must pay Social Security and Medicare taxes (self-employment taxes), based on the profit of your business.  The Social Security portion of these self-employment taxes remains the same as the OASDI tax and the taxable income limit is the same. For 2013, the Social Security portion of your self-employment income will be taxed up to $113,700.

Payroll Tax Cut Set to Expire

Another potential change that affects both employees and employers is that the 2% payroll tax cut on Social Security wages is set to expire January 1, unless the cut is extended by law before that date. With a presidential election coming up in just a few weeks, Congress is in recess, so any temporary or permanent cuts will have to wait until Congress re-convenes in November. We will all just have to sit tight on this one.

More about the Social Security Maximum


January 18, 2013 at 4:12 pm
(1) justin says:

I guess I was living under a rock and didn’t know about this. Imagine my surprise when I opened my check to see it less. “Did I get a pay cut?” As it turned out, I did the math and I’m losing $600 a year because of this. Hope it helps somebody else because the gas, water, and electric companies would sure enjoy that cash too!

January 19, 2013 at 10:24 am
(2) Theresa says:

You were not the only one apparently living under a rock Justin, I had the same experience when I opened my paycheck. There was so much noise being made about the fiscal cliff that the details such as “I’m gonna get less in my paycheck” seemed to be drowned out.

January 25, 2013 at 9:02 am
(3) Angry Taxpaxer says:

My FicaOSADI went up 50 dollars from last year!!!!!!!

January 25, 2013 at 4:30 pm
(4) Ninetyniner says:

Likewise my OSADI went up 50 dollars this paycheck, which means $1200 for 2013. Fifty dollars is the difference between 6.2% of pay and 4.2% mentioned in the article for OSADI. Folks, do the math. The percentages seem small but they add up fast. These crooks in congress and the banks do a great job of keeping this kind of information out of our public schools and mass media.

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