The Social Security Administration announced cost-of-living changes for 2022 affecting individuals who are working, businesses, and retirees (SSA Release, Oct. 13, 2021). Benefits for recipients of Social Security benefits will increase in 2022 by 5.9%, the largest increase in 39 years. The wage base for workers and employers paying into the Social Security system has been increased as well, as has the earnings limit for certain Social Security recipients who continue to work.
Wage Base for Social Security Taxes
For 2022, the Social Security portion of FICA and self-employment taxes will apply to the first $147,000 of wages (up from $142,800 in 2021). Technically, this is the “old age, survivors, and disability insurance (OASDI) tax.” The same dollar amount also applies for the Social Security portion of self-employment taxes. The Medicare portion will apply to all wages and net earnings from self-employment, without limitation. The tax rate on employees and employers remains unchanged at 6.2% for the Social Security portion and 1.45% for the Medicare portion (total of 7.65%). The tax rate on self-employed individuals is 12.4% for the Social Security portion and 2.9% for the Medicare portion (total of 15.3%). Only 92.35% of net earnings from self-employment are subject to self-employment tax. Self-employed individuals may deduct one-half of their tax as an adjustment to gross income (Code §1402(a)(12)).
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