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Tax Updates

SSA predicts no change to Social Security wage base for 2011

The U.S. Social Security Administration (SSA) predicted in a recent report that the amount of wages - the "taxable wage base" - subject to Social Security taxes would remain at $106,800 for tax year 2011. The wage base was $106,800 for both 2009 and 2010.

Employers withheld 6.2 percent in Old Age, Survivors, and Disability Insurance (OASDI) taxes on their employees' wages that do not exceed the taxable wage base. Employers in turn pay a matching share of the 6.2 percent OASDI tax on the taxable wage base. Once the wage limit is reached, the OASDI tax does not apply. Wages exceeding the limit are exempt from the tax.

In addition, employers and employees each pay a 1.45 percent hospital insurance (HI) tax for Medicare. Thus, the combined tax rate for OASDI and HI, on employee wages up to the wage base, is 7.65 percent. The HI tax applies to all wages and is not limited by the taxable wage base.

The SSA predicted the 2011 wage base in its 2010 annual report on Social Security trust funds. The report estimates future contributions to the OASDI and Federal Disability Insurance trust funds. The report also predicted that, starting in 2037, both trust funds would be unable to pay scheduled benefits in full unless changes were made to the tax rate and amount of benefits.