2015 Social Security Wage Base Increases to $118,500
FICA tax of 6.2% for employer and employee applies on wages and SE earnings up to $117,000 for 2014. The Social Security Administration (SSA) just announced that for 2015, the new wage base will be $118,500 or an increase of $1,500. This means, that for 2015, the maximum Social Security tax that employers and employees will each pay is $7,347 ($118,500 x 6.2%). A self-employer person with at least $118,500 in net self-employment earnings will owe $14,694 for the Social Security part of the self-employment tax.
The cost-of-living adjustment for social security recipients will be 1.7%. This will result in an 1.7% increase to benefits they received beginning with the January 2015 payment.
Persons collecting social security who are under full retirement age can earn up to $15,720 for 2015 ($1,310 per month) without incurring a penalty. Above that amount, they will have to pay back $1 for every $2 over this threshold. In the year they reach full retirement age, they can earn up to $41,880 ($3,490 per month) before reaching full retirement age. If they earn more than these amounts, they are required to pay back $1 for every $3 above the threshold.
As an example, assume Jane’s full retirement age is 66. In 2014, she turns 65 and retires. She elects to keep working and makes $2,000 per month after starting to collect social security benefits. The limit for 2014 was $1,290 per month, so her excess is $710. She is required to pay back to SSA $355 ($810 divided by 2) for every month she worked after retiring. In 2015, she gets a better job paying $4,000 per month. The excess subject to payback is $510 ($4,000 minus $3,490), however, she is only required to pay back $170 ($510 divided by 3) until the month she hits full retirement age when she can earn as much as she wants without having to pay any of it back to SSA.
The maximum Social Security Benefit (at full retirement age) is $2,663, however, a person waiting until age 70 to collect benefits assuming maximum benefits at age 66 would receive approximately $3,600. For every year you wait to start collecting after full retirement age, you receive an additional 8% increase in monthly benefits.
Paul Neiffer, CPA
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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