The Social Security Administration (SSA) has announced that the social security wage limitation for 2019 will be $132,900, up from $128,400 in 2018.
Employees and employers each pay the social security portion of FICA (6.2%) on compensation up to the year’s wage limitation. In addition, the employee and employer will each pay 1.45% of their total compensation as medicare tax. Employees who make more than $128,700 in 2018 will pay 7.65% FICA tax on the first $132,900 (total $9,994.08) plus 1.45% FICA on amounts over $132,900. Again, the employer will pay an equal amount.
The Patient Protection and Affordable Care (“Obamacare”) Act imposes an additional medicare tax of 0.9% on employees who earn more than $200,000 ($250,000 if a joint return is filed), which is not matched by the employer.
Pretax contributions to a §401(k) plan, although not taxable for income tax purposes, are included in compensation for determining the FICA tax. However, employee contributions to a health savings account made by salary reduction are not included in compensation for determining the FICA tax.