You and Your Social Security (Tax)
By James Christy, Wealth Advisor
Corporate and Individual income tax rates may be coming down as a result of the recently-enacted Tax Reform Act, but the combined Social Security and Medicare (FICA) tax continues to go up.
For 2018, the taxable wage base for the Social Security portion of FICA is $128,700, a slight increase over the 2017 wage base of $127,200. At a 6.2% rate, the Social Security tax is paid by both employees and employers. Both also pay the 1.45% Medicare portion of FICA, resulting in a combined FICA tax of 7.65%. The Medicare portion of the tax is not limited by the Social Security taxable wage base of $128,700. All wages and salaries, without limitation, are subject to the Medicare tax, and for those individuals earning $200,000 or more ($250,000 for married filing jointly), there is a Medicare surtax of 0.9%.
Of course, self-employed persons, including independent contractors who receive a Form 1099, pay both the employer and employee portions of FICA taxes. Accordingly, 15.3% of self-employment earnings are subject to tax, not counting any Medicare surtax for higher earning taxpayers.
Another thing to keep in mind: Social Security benefit recipients age 70 or above who may still be working, continue to pay Social Security and Medicare tax, even though their Social Security benefit amount will not be adjusted upward for their additional earnings after age 70.
This article is written for general educational purposes only and should not be construed as individual tax advice. For tax advice, please consult a qualified tax advisor.
James Christy, J.D.
Wealth Advisor
After a successful career as a senior executive in both the public and private sectors, Jim Christy joined Northwest Financial Advisors in 2003. Jim advises higher net worth families and individuals on a range of retirement income planning, estate planning, investment planning and tax mitigation strategies.
Consistently each year for the past 15 years, LPL Financial has recognized Jim among the top five Financial Institution Services (FIS) advisors. LPL Financial currently ranks Jim the #4 FIS advisor in the U.S. in total production, among LPL’s approximately 3,500 financial institution-based advisors.1 Jim was also recognized on Bank Investment Consultant’s former list of Top Bank Advisors from 2012-2019, including a #2 ranking in 2015.² Five Star Professional has also selected Jim as a Five Star Wealth Manager award recipient every year since 2015.³
Prior to joining Northwest Financial Advisors, Jim was a senior executive for two Fortune 500 companies and one of the nation’s leading industry trade associations. He was Vice President, Government Relations, in charge of the Washington office of defense and aerospace conglomerate, TRW Inc. (1993-1999), Washington Counsel for Air Products & Chemicals Inc. (1985-1993) and senior vice president at PhRMA, the trade association of the U.S. pharmaceutical industry (2000-2001). He previously served seven years on Capitol Hill in senior staff positions in the U.S. House of Representatives, including as Counsel to the House Committee on Energy and Commerce (1981-1984). Jim also served as Counsel to the Secretary of the Interior in the Reagan Administration (1984-85). In 1980, Jim was a candidate for a seat in the U.S. House of Representatives representing Ohio’s 6th Congressional District.
Jim holds his undergraduate degree in economics from the University of Cincinnati and his Juris Doctor (J.D.) from the University of Cincinnati College of Law. Jim is a member of the Bar of the U.S. Supreme Court.
Jim and his wife, Grace, are the parents of six adult children and are blessed with 12 grandchildren.
1 Rankings based on total production among all LPL Financial FIS advisors through September 30, 2024.
2 Based on assets under management, production, asset growth, percentage of fee business and production-per-assets.
3 Award based on 10 objective criteria such as credentials, experience and assets under management, among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2015 -2024 Five Star Wealth Managers.
