Get Ready to Pay An Extra $558
The Social Security Administration released their final 2019 numbers last week. Most Social Security recipients will receive an extra 2.8% in their pay starting in January 2019. That is the good news.
The bad news is that the Social Security Wage Base has increased from $128,400 to $132,900. For those farmers over the wage base amount in both years, this means that you will now owe an extra $558 of FICA tax compared to 2018. The Medicare tax remains at 1.45% on all earnings (2.9% for self-employed farmers) and the extra .9% high income Medicare tax on the employee continues at the same level ($200,000 single and $250,000 MFJ).
If you elect the optional self-employment method on your return, you will be credited with four quarters of coverage and will owe self-employment tax on $5,440 or $832.32 of SE tax. You can earn up to $17,640 before full retirement age (FRA) and not have any repayment owed to Social Security.
The maximum monthly Social Security Benefit at FRA is now $2,861 with FRA at age 66. This also means that if you wait until age 70 your maximum monthly benefit will approach $4,000.
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.
So- a 3.5% tax increase for farmers and other self-employed taxpayers, and social security recipients only get a 2.8% increase in benefits? Hmmmmm……Government at its finest?