Tax Tip: Social Security
The Social Security wage base increases for 2014 to $117,000, up by $3,300 from 2013. The tax rate imposed on employers and employees remains at 6.2%. The Medicare tax rate also remains stable for 2014 at 1.45% for employers and employees. However, the 0.9% Medicare surtax applies to single individuals with wages exceeding $200,000 and couples earning more than $250,000. The surtax doesn’t affect the employer’s share. Self-employed individuals are also subject to the surtax.
Social Security benefits increased by a mere 1.5% in 2014, due to low inflation. The earnings limits are increasing as well. Individuals who become age 66 in 2014 do not lose any benefits if they make $41,400 or less prior to reaching age 66. Individuals between ages 62 and 66 by the end of 2014 can make up to $15,480 without losing any of their benefits. There is no earnings maximum once an individual becomes 66 years of age. The amount needed to qualify for coverage increases to $1,200 per quarter. Therefore, earning $4,800 anytime during 2014 will net the full four quarters of coverage.
The threshold for the nanny tax increases to $1,900 for 2014.
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