No matter who wins the election, Social Security taxes will go up for the wealthiest.
Photo: JIM WATSON y BRENDAN SMIALOWSKI / AFP / Getty Images
It doesn’t matter if Joe Biden or Donald Trump win the presidential election, high-income citizens can expect an increase in Social Security taxes in 2021.
Social security in the United States helps millions of people by contributing income for their retirement and is not only limited to those who need it most.
Each month some of the largest checks go to high-income Americans who paid the maximum annual tax amount on Social Security payroll during your working life.
The real tax rate hasn’t changed in 30 years, but nevertheless, the salary base on which that tax rate is applied is increasing in 2021, which means that Regardless of who wins the presidential election, high-income workers will pay more taxes.
Workers know that Social Security payroll taxes lower your take-home pay. On some paychecks the rate is 6.2 percent that is added to the tax of 1.45% of Medicare in a concept that is identified as STAY that appears on the payment receipt. If income is the same from year to year then the Social Security payroll tax will also be the same.
The Social Security Administration announced in a statement in mid-October that the maximum amount of earnings subject to Social Security tax (FICA) will increase to $ 142,800 next year, suffering an increase of 3.7%.
A lot of workers don’t realize that your employer contributes an extra 6.2 percent for Social Security taxes. Employees do not have to cover that amount, only the self-employed are responsible for covering a 12.4 percent as part of the taxes they pay.
Currently, there is a limit on the amount of income subject to social security taxes, but that amount increases each year based on changes in wages paid to workers. In 2021, the salary base will rise to $ 5,100 for a cap of $ 142,800 annually.
Who will pay more?
- If you earn less than $ 137,700 annually, in 2020 as in 2021, then you will pay the same in Social Security taxes if your salary stays the same. Any change in taxes will only be due to changes in your earnings.
- If you earn more than $ 142,800 both in 2020 and 2021, then your Social Security payroll tax will go up. An extra tax of $ 5,100 will be subject to the 6.2% tax resulting in an extra $ 316.20 in taxes. That will raise the total taxes paid up to $ 8,853.60.
- If you earn between $ 137,700 and $ 142,800 in 2020 and 2021, then increased your taxes will be between 0 and $ 316.20 dollars and it will depend on where in that range you fall. For example, if your income is $ 140,000 per year, you will exceed the salary base limit for 2020 and therefore, you will have to pay taxes only for your first $ 137,700 of income. However, with the highest salary base limit in 2021, the entire $ 140,000 would be taxed so you would pay an extra $ 142.60 dollars.
- For those who are self-employed, the impact could be double. Those workers who earn the maximum in 2020 and 2021 will see a $ 632.40 increase in the Social Security share of taxes.
Related: The Social Security check will come with a surprise for retirees.
How many will they have to pay?
According to estimates, the salary cap of $ 142,800 it only affects between 4 and 6 percent of workers who have incomes that exceed the wage base, which is equivalent to about 10 or 11 million employees who could experience an increase in their taxes.
The Social Security wage base has been on the rise for a long time and citizens can expect that that trend will continue to rise in the coming years.
That means the 2021 Social Security tax increases are just a taste of what high-income taxpayers can wait in the future.
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