Social Security Wage Base Increase for 2024
The portion of personal income subject to Social Security tax has risen to $168,600 this year from $160,200 in 2023. This adjustment means some employees will pay approximately $521 more in taxes compared to the previous year. These limits are determined by changes in the National Wage Index (NAWI), which typically increases annually to align Social Security benefits with inflation. In 2024, a larger share of wages falls under the 6.2% OASDI tax covering old-age, survivors, and disability insurance.
Exemptions and Savings Beyond the Wage Base
Earnings above the $168,600 threshold remain exempt from Social Security payroll tax, resulting in significant savings for higher-income individuals. For instance, an employee whose salary exceeds the base by $10,000 saves $620 on these taxes, while someone $30,000 over the limit saves $1,860. Employers deduct these taxes automatically from payroll, but self-employed individuals must remit their own contributions up to IRS limits.
Take, for example, an employee with an annual salary that exceeds the wage base by $10,000. In this case, they would save $620 on Social Security taxes.
Taxation of Social Security Benefits
Approximately 40% of Social Security recipients must pay federal income taxes on their benefits, typically when they have substantial additional income, according to the Social Security Administration. Up to 85% of benefits become taxable once income surpasses specific thresholds. A Senior Citizens League survey indicated that 26% of long-term recipients paid taxes on benefits for the first time in 2023, with more expected this year due to the significant 2023 COLA increase.
Earnings Limits Before Full Retirement Age
Retirees reaching full retirement age in 2024 can earn up to $59,520 before benefits reduce by $1 for every $3 over the limit, an increase of $3,000 from 2023.
2024 Federal Tax Filing Season
The IRS will begin accepting 2023 tax returns on January 29, 2024. Most taxpayers face an April 15 deadline to file, pay owed taxes, or request extensions, with Maine and Massachusetts residents granted until April 17 due to holidays. Those in federally declared disaster areas may receive additional time. The agency anticipates over 128.7 million individual returns by deadline, with most refunds issued within 21 days, though some require longer review.
