Autumn is that time of year when the federal government begins to announce changes that will affect taxpayers in the coming calendar year. In this vein, the Social Security Administration (SSA) recently announced some important changes to the 2018 wage base for social security tax, as well as an increased threshold for the Nanny tax.
Social Security Wage Base Increases for 2018: The SSA announced that the maximum earnings subject to the Social Security component of the FICA tax will increase from $127,200 to $128,700 for 2018. This means that for 2018, the maximum Social Security tax that employers and employees will each pay is $7,979.40 ($128,700 x 6.2%). A self-employed person with at least $128,700 in net self-employment earnings will pay $15,958.80 ($128,700 x 12.40%) for the Social Security part of the self-employment tax. The Medicare component remains 1.45% of all earnings, and individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly, $125,000 for married filing separately) will pay an additional 0.9% in Medicare taxes (as part of the Obamacare legislation).
Nanny Tax Threshold Increases for 2018: Also for 2018, the SSA has announced that cash wages paid by an employer for domestic service in the employer’s private household is subject to FICA tax (often referred to as nanny tax) if the amount of wages paid during the year is more than $2,100. This is up from $2,000 for 2017. Note that this dollar threshold applies separately to each household employee.
Visit our website for related articles: