The Social Security Administration (SSA) announced that the 2018 social security wage base will be $128,400 for 2018. This is a $1,200 increase from the 2017 wage base of $127,200.
Originally, the SSA said the 2018 Social Security wage base would be $128,700. The lower amount was then introduced at the end of November due to a number of corrected W-2s provided by a national payroll provider.
What does this mean?
The Social Security tax is collected from both employees and employers to fund the Social Security program. It’s normally collected via payroll tax by your employer (or via the self-employment tax if you’re self-employed) and then forwarded on to the government to fund retirement, disability and other benefits.
Each year, the SSA releases the Social Security Wage base adjustments, which are based on increase in average wages. The announcement affects the taxable maximum wage subject to Social Security tax. In other words, the maximum salary that can be subject to the Social Security tax is $128,400.
Why the change?
The SSA uses the information they have to make adjustments to the wage base. In late October, the SSA received approximately 500,000 corrections for 2016 W-2s. These corrections altered the information on the national average wage and affected three items:
2018 taxable minimum
Primary insurance amount bend points
Family maximum bend points
When does this start?
The change to the taxable maximum takes effect in January 2018.