[ad_1]
Nobody likes to pay taxes and that is why many of them have welcomed the lower tax rates provided by last year 's tax reform efforts. Yet, even for those who benefit from income tax relief, a potential increase in the amount of tax they pay to obtain Social Security benefits could offset some of their savings elsewhere. .
Not everyone will face an increase in Social Security payroll taxes. But with the most recent estimates estimating the number of taxpayers involved at around $ 10.5 million, you'll have to take a closer look to see if you'll be one of the few unfortunate people having to pay $ 279 or more in security contributions social benefits in 2019.
Two social security cards on a $ 100 note.
Source of the image: Getty Images.
How social security costs work
The federal government levies a tax on the social security payroll to be used for the payment of benefits. Almost all US workers pay social security contributions, with only state and local government employees having money earmarked for another pension plan.
The amount of the payroll tax is 6.2% of salary. Employers also add another 6.2% on your behalf, or 12.4%. If you are self-employed, you will have to cover the total of 12.4%.
Since the payroll tax rate is a fixed percentage, your taxes increase according to your income. However, each year, the government applies a tax on a maximum level of income. This tends to increase each year in line with inflation, and the Social Security Administration recently announced that this amount, also known as the Social Security Salary Base, would reach $ 132,900. That's $ 4,500 more than its counterpart of 2018, which is one of the biggest gains recorded in recent years.
|
Year |
Social Security Salary Base |
|---|---|
|
2011 |
$ 106,800 |
|
2012 |
$ 110,100 |
|
2013 |
$ 113,700 |
|
2014 |
$ 117,000 |
|
2015 |
$ 118,500 |
|
2016 |
$ 118,500 |
|
2017 |
$ 127,200 |
|
2018 |
$ 128,400 |
|
2019 |
$ 132,900 |
Data source: Social Security Administration.
How much the maximum social security tax is rising
If you are an employee, while you are paying 6.2% on $ 132,900, your tax will rise to $ 8,239.80. Last year, the maximum amount of tax for employees was $ 7,960.80. The difference is $ 279, and that's the amount of the increase at which those who earn more than $ 132,900 in 2019 will face over the next year.
Your employer will eventually face the same $ 279 tax increase as you. The self-employed will have the worst news because they will be responsible for the entire amount, paying a total of $ 558 in additional social security taxes.
Bad news for 10.5 million Americans
Most workers will not have to deal with this potential tax increase, as their incomes will be well below the maximum limit of $ 132,900. As the rate of 6.2% remains unchanged, those who earn wages below the limit will not result in any tax changes.
According to the most recent data available, about 10.5 million workers have earned enough to pay the maximum amount of the social security wage tax. This number has fluctuated from year to year, but as a general rule, between 10 and 11 million taxpayers could face higher taxes. Among the self-employed who have to pay a double tax increase, the latest figures show some 770,000 people who work for themselves and pay an additional $ 558.
Some people will see a tax increase below the maximum amount. For example, if your salary is between $ 128,400 and $ 131,900, you only pay the 6.2% tax on the additional amount over $ 128,400. Nevertheless, paying nothing more eliminates the benefit of having a higher salary.
Stay on the rise
As a general rule, the social security wage base is increasing every year and most taxpayers do not have to worry about its impact on social security payroll taxes. But for those at the top end of the income spectrum, the biggest tax increase in 2019 is only the latest in a series of gradual but significant increases over time.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " More from The Motley Fool "data-reactid =" 41 "> More from The Motley Fool
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Motley Fool has a disclosure policy."data-reactid =" 46 ">Motley Fool has a disclosure policy.
Source link
