FICA Wage Base Likely to be $126,000 in 2017
The Social Security Administration’s Office of the Chief Actuary has projected, based on two out of three of its methods of forecasting, that the 2017 FICA wage base will increase from $118,500 in 2016 to $126,000 in 2017. The current wage base subjects employee’s to maximum FICA tax of $7,328.40. If the new base goes into effect, this maximum tax will increase to $7,812 or an increase of $483.60. Self-employed taxpayers (including many farmers) will be subject to total FICA tax equal to twice this amount or $15,624.
For earnings in excess of this amount, they will be subject to Medicare tax at either 2.9% or 3.8%. The projections for the FICA wage base after 2017 are as follows:
- 2018 – $129,900
- 2019 – $135,900
- 2020 – $142,500
- 2021 – $148,800
- 2022 – $155,100
- 2023 – $161,700
- 2024 – $168,300
- 2025 – $175,200
One way of paying for tax reform (if it happens) is to subject more of farmers’ income to FICA tax. Several of the proposals include making some percentage of all flow-through income (such as LLCs, S corporations and partnerships) subject to FICA tax. If this happens, plus increasing the FICA wage base, you will be subject to an additional 15% tax, but lawmakers will say your income tax went down. There is no free lunch in Congress and we will keep you posted.
Paul Neiffer, CPA
CliftonLarsonAllen, LLP
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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