2017 Social Security Tax Maximum

[Need2Save]

Today the SSA announced the new earnings limit for 2017.  It will be $127,200 for 2017.  An increase of $8,700 from the 2016 level of $118,500.

You will pay $539.40 more in OASDI tax if you make over the new limit in 2017!  Am I the only one surprised at such a large jump for next year?  As a reminder, no limit on the HI portion of the tax (1.45%) plus if you make over $200,000 individual (or $250,000 MFJ) you pay an extra 0.9% in Medicare Taxes. 

Fun Fact from SS:  12 million people will pay more SS tax in 2017 under the new limit!   

[ender]

Why is this surprising?

It's the "easy button" for SS solvency.

[DailyGrindFree]

It is definitely the easy solution. The sad part is I will be one of those 12 million people. :-( Hopefully there will still be SS when I get to SS age.
They want the middle class to pay more and more for everything.

[Undecided]

It is definitely the easy solution. The sad part is I will be one of those 12 million people. :-( Hopefully there will still be SS when I get to SS age.
They want the middle class to pay more and more for everything.

There's a recent thread dedicated to the proposition that you're rich, not middle class.

Also, the increase in the cap occurs automatically on the basis of increases in the wage index; it's not like this year's change reflects some particular attempt to "fix social security."

[JustGettingStarted1980]

It is definitely the easy solution. The sad part stupendously awesome part is I will be one of those 12 million people. :-( Hopefully there will still be SS when I get to SS age.
They want the middle class to pay more and more for everything.

Woopeee!!! $500 and change to have the privilege of making 2.5 times the household income in the USA. Small potatoes...

[Undecided]

It is definitely the easy solution. The sad part stupendously awesome part is I will be one of those 12 million people. :-( Hopefully there will still be SS when I get to SS age.
They want the middle class to pay more and more for everything.

Woopeee!!! $500 and change to have the privilege of making 2.5 times the household income in the USA. Small potatoes...

Well, plus the progressive income tax, the Net Investment Income Tax and the Additional Medicare Tax, losing the IRA deduction and student loan interest deduction and, eventually, the exemption and itemized deduction phaseouts ....

[DailyGrindFree]

It is definitely the easy solution. The sad part stupendously awesome part is I will be one of those 12 million people. :-( Hopefully there will still be SS when I get to SS age.
They want the middle class to pay more and more for everything.

Woopeee!!! $500 and change to have the privilege of making 2.5 times the household income in the USA. Small potatoes...

Well, plus the progressive income tax, the Net Investment Income Tax and the Additional Medicare Tax, losing the IRA deduction and student loan interest deduction and, eventually, the exemption and itemized deduction phaseouts ....

In addition to those, no help for kid's college, less from child tax credit, pay more for health care (it is based on wages @ where I work), pay more for pension (I shouldn't complain about this one even though I am not planning on working for long). It is not about being ungrateful. I thought the idea is to keep as much of your money as possible, be efficient in order to retire early. Sometimes I wonder if we would be in the same boat if I made 70K or so.

[ender]

It is definitely the easy solution. The sad part stupendously awesome part is I will be one of those 12 million people. :-( Hopefully there will still be SS when I get to SS age.
They want the middle class to pay more and more for everything.

Woopeee!!! $500 and change to have the privilege of making 2.5 times the household income in the USA. Small potatoes...

Well, plus the progressive income tax, the Net Investment Income Tax and the Additional Medicare Tax, losing the IRA deduction and student loan interest deduction and, eventually, the exemption and itemized deduction phaseouts ....

In addition to those, no help for kid's college, less from child tax credit, pay more for health care (it is based on wages @ where I work), pay more for pension (I shouldn't complain about this one even though I am not planning on working for long). It is not about being ungrateful. I thought the idea is to keep as much of your money as possible, be efficient in order to retire early. Sometimes I wonder if we would be in the same boat if I made 70K or so.

If making so much money is such a burden, work part time or six months a year.

There are significant tax incentives to do this, not to mention the ones you both have listed.

[DailyGrindFree]

It is definitely the easy solution. The sad part stupendously awesome part is I will be one of those 12 million people. :-( Hopefully there will still be SS when I get to SS age.
They want the middle class to pay more and more for everything.

Woopeee!!! $500 and change to have the privilege of making 2.5 times the household income in the USA. Small potatoes...

Well, plus the progressive income tax, the Net Investment Income Tax and the Additional Medicare Tax, losing the IRA deduction and student loan interest deduction and, eventually, the exemption and itemized deduction phaseouts ....

In addition to those, no help for kid's college, less from child tax credit, pay more for health care (it is based on wages @ where I work), pay more for pension (I shouldn't complain about this one even though I am not planning on working for long). It is not about being ungrateful. I thought the idea is to keep as much of your money as possible, be efficient in order to retire early. Sometimes I wonder if we would be in the same boat if I made 70K or so.

If making so much money is such a burden, work part time or six months a year.

There are significant tax incentives to do this, not to mention the ones you both have listed.

Ender, I am fairly new to this forum and there is a lot to learn here. I would definitely be looking into all the possibilities. 

[Undecided]

It is definitely the easy solution. The sad part stupendously awesome part is I will be one of those 12 million people. :-( Hopefully there will still be SS when I get to SS age.
They want the middle class to pay more and more for everything.

Woopeee!!! $500 and change to have the privilege of making 2.5 times the household income in the USA. Small potatoes...

Well, plus the progressive income tax, the Net Investment Income Tax and the Additional Medicare Tax, losing the IRA deduction and student loan interest deduction and, eventually, the exemption and itemized deduction phaseouts ....

In addition to those, no help for kid's college, less from child tax credit, pay more for health care (it is based on wages @ where I work), pay more for pension (I shouldn't complain about this one even though I am not planning on working for long). It is not about being ungrateful. I thought the idea is to keep as much of your money as possible, be efficient in order to retire early. Sometimes I wonder if we would be in the same boat if I made 70K or so.

If making so much money is such a burden, work part time or six months a year.

There are significant tax incentives to do this, not to mention the ones you both have listed.

I already do. With something like a 54% marginal tax rate (considering the effect of Pease limitations) and little kids at home, I assume it's what society wants me to do. Maybe I'll go back to full time when my younger is in school. None of that changes the fact that JustGettingStarted1980's characterization of that $500 as the price for the privilege* was woefully incomplete, which is what I had responded to.

*Apologies to ender for misattributing that to him or her.

[ender]

I already do. With something like a 54% marginal tax rate (considering the effect of Pease limitations) and little kids at home, I assume it's what society wants me to do. Maybe I'll go back to full time when my younger is in school. None of that changes the fact that your characterization of that $500 as the price for the privilege was woefully incomplete.

??

[Undecided]

I already do. With something like a 54% marginal tax rate (considering the effect of Pease limitations) and little kids at home, I assume it's what society wants me to do. Maybe I'll go back to full time when my younger is in school. None of that changes the fact that your characterization of that $500 as the price for the privilege was woefully incomplete.

??

Fixed; apologies.

[seattlecyclone]

Was this just the normal inflationary increase, or did Congress take action to increase the amount beyond that? The Social Security Administration doesn't have authority to just increase the limit to whatever they feel like; they need to follow the laws that are on the books.

[Undecided]

Was this just the normal inflationary increase, or did Congress take action to increase the amount beyond that? The Social Security Administration doesn't have authority to just increase the limit to whatever they feel like; they need to follow the laws that are on the books.

Just the wage index increase.

[Nothlit]

I'd be interested to learn more about how this particular number is arrived at. After all, most other "inflation-related" numbers I associate with wages and taxes, like 401k, IRA, and HSA contribution limits, are not changing from 2016 to 2017. So it seems a little odd that the SSWB would change so significantly by comparison. The formula must be based on entirely different criteria.

Edit: sort of answering my own question, I found this page which details the formula for the wage base. Still seems odd to me that wages could have increased so much in the last year, but whatever factors they use to set 401k/IRA/etc. contribution limits are still stagnant.

[terran]

I'd be interested to learn more about how this particular number is arrived at. After all, most other "inflation-related" numbers I associate with wages and taxes, like 401k, IRA, and HSA contribution limits, are not changing from 2016 to 2017. So it seems a little odd that the SSWB would change so significantly by comparison. The formula must be based on entirely different criteria.

I'm not too familiar with it, but from what I've gleaned those other limits are based on inflation while the social security limit is based on average wages.

[katsiki]

I'd be interested to learn more about how this particular number is arrived at. After all, most other "inflation-related" numbers I associate with wages and taxes, like 401k, IRA, and HSA contribution limits, are not changing from 2016 to 2017. So it seems a little odd that the SSWB would change so significantly by comparison. The formula must be based on entirely different criteria.

Edit: sort of answering my own question, I found this page which details the formula for the wage base. Still seems odd to me that wages could have increased so much in the last year, but whatever factors they use to set 401k/IRA/etc. contribution limits are still stagnant.

Couldn't agree more!  Seems they never increase anything helpful... Why would we allow people to save more?  (Yeah, I know that most won't).

I just learned about the increase a few minutes before seeing this thread.  Not excited for next year..

[ender]

I'd be interested to learn more about how this particular number is arrived at. After all, most other "inflation-related" numbers I associate with wages and taxes, like 401k, IRA, and HSA contribution limits, are not changing from 2016 to 2017. So it seems a little odd that the SSWB would change so significantly by comparison. The formula must be based on entirely different criteria.

Edit: sort of answering my own question, I found this page which details the formula for the wage base. Still seems odd to me that wages could have increased so much in the last year, but whatever factors they use to set 401k/IRA/etc. contribution limits are still stagnant.

It seems this number is indexed to the average wage index.

401k/IRA are indexed to inflation and rounded. The two might be correlated but are derived from different indices.

[Undecided]

The max just keeps on going up.  Whatever happened to that doughnut they promised so it only affected the very rich?

Who promised this? Who were "the very rich" in this promise? I thought that "honest, hard-working Americans" took pride in seeing their social security benefits as the (convoluted) fruits of "paying into the system." Surely they don't want to be forced to confront the fact that for some significant percentage of them, it's functionally a welfare payment.

[MDM]

See Social Security Payroll Taxes Increase in 2017 for a decent explanation of the difference between the benefit COLA and the wage base maximum.

[Hotstreak]

I have read that this is basically two years of increases.  They are only able to increase the wage limit if there was an increase in CPI that year, and last year CPI went down slightly.  As of 3Q16 CPI went up a little but, so the wage base is now being increased.

[Paul der Krake]

So because the middle class got a raise last year, my taxes are going up?

Tyranny!

[moof]

I wish they would remove the cap entirely.  I want SSA to be solvent, and even expanded.  So much of the country relies on it.  Yes, I am currently above the cap.  Yes, I still want people like me to pay their fair share.  My taxes are too low.  I want a better run country, including higher spending on a good safety net, and less military.  End rant.

[MoonLiteNite]

Not shocked, government taking more and more money is nothing new.
Kinda like the stock market, it always goes up! May have some dips now and then but the numbers always get bigger and bigger

[JustGettingStarted1980]

It is definitely the easy solution. The sad part stupendously awesome part is I will be one of those 12 million people. :-( Hopefully there will still be SS when I get to SS age.

They want the middle class to pay more and more for everything.

Woopeee!!! $500 and change to have the privilege of making 2.5 times the household income in the USA. Small potatoes...

Well, plus the progressive income tax, the Net Investment Income Tax and the Additional Medicare Tax, losing the IRA deduction and student loan interest deduction and, eventually, the exemption and itemized deduction phaseouts ....

In addition to those, no help for kid's college, less from child tax credit, pay more for health care (it is based on wages @ where I work), pay more for pension (I shouldn't complain about this one even though I am not planning on working for long). It is not about being ungrateful. I thought the idea is to keep as much of your money as possible, be efficient in order to retire early. Sometimes I wonder if we would be in the same boat if I made 70K or so.

If making so much money is such a burden, work part time or six months a year.

There are significant tax incentives to do this, not to mention the ones you both have listed.

Whoops, didn't mean to strike a nerve there. Apologies all around. 

To Undecided and Daily Grind, I suppose my point is that it's much better to be on our side of that income ladder than the other side. Being on our side gives us choices. We can choose to save more or spend less or max out pretax contributions or 529's or give more to charity or take advantage of real estate tax depreciation laws. If we made a lot less money, all of those choices would not exist.

I agree that the middle class is "getting squeezed" over the last couple generations or so, but I wouldn't blame social security payroll tax increases at all for this. Go look at a chart that shows Corporation Federal Income Tax vs Individual Taxpayer Federal Income over the last 80 years. Look again at top marginal tax brackets trends over the last couple generations (I'm talking 1 million plus $ income per year). Those guys are making a killing, and everyone else has to pick up the slack if you want Roads, Schools, Police Departments, International Warfare, etc...

When it comes down to it, where's the government going to get their income from?
1. the poor (they don't got any money -no point trying to squeeze water from a rock)
2. the rich (they have lobbyists, lawyers, and politicians paid for)
3. the huge multi national corporations (they have MORE lobbyists, lawyers and politicians)
4. the sucker middle class with incomes between 50K and 300K

JGS

[JustGettingStarted1980]

https://en.wikipedia.org/wiki/Taxation_in_the_United_States#Federal_taxation

For you chart and data lovers -> All the graphs a guy could ever want on Federal Taxation and Income

[Mississippi Mudstache]

Damn. I really wish I made enough money to join the chorus of complaints. Sadly, I'm well under the six-figure mark so nothing to complain about this year. Boo-hoo.

[Undecided]

Damn. I really wish I made enough money to join the chorus of complaints. Sadly, I'm well under the six-figure mark so nothing to complain about this year. Boo-hoo.

To make this really clear, I don't see any complaint above---the point was that the cavalier dismissal of one particular small tax increase as the price to be paid for earning some amount of money is so incomplete as to be silly. Obviously, any of us is free to make less money and so must have decided it's worth it to make more (as I noted, I already work part time because keeping less than half of the additional money I'd make by going full time isn't worth it to me while my kids are small), just as you may have chosen to make less by how much you work, what you do, etc.

And anyone clamoring to raise taxes (on others) to ease their own retirement through social security is just as guilty of complaint.

[Roland of Gilead]

The people that pop up and say you should rejoice for making more money than X and not mind paying the extra tax overlook some things.

A electrician might make $60,000 a year.   Possibly only a few years in a lower cost school, so they had a head start on saving.

A person with a masters degree, 5 or more years of expensive higher education, might make $120,000, but are behind on the saving curve by up to 4 years over the lower earner.  They also possibly have $$$ extra in debt from student loans.

So tax the fuck out of the person with the higher income, because they earn so much.  Forget all of the other factors because that would just muddy your belief that high wage earners are just lucky.

[Mississippi Mudstache]

Let's be clear about something else: SS will not be solvent without tax increases or reduced benefits. This is not an unexpected development. And if you don't see any complaints in this thread, then LOL.

[Paul der Krake]

A person with a masters degree, 5 or more years of expensive higher education, might make $120,000, but are behind on the saving curve by up to 4 years over the lower earner.  They also possibly have $$$ extra in debt from student loans.

Yeah, or he might be a high school dropout making bank in North Dakota who drunk drives and kills kittens for breakfast.

We just don't know.

Taxes have some granularity, but we can't reasonable expect them to cover every scenario in such a way that everybody feels good about it.

[Mississippi Mudstache]

The people that pop up and say you should rejoice for making more money than X and not mind paying the extra tax overlook some things.

A electrician might make $60,000 a year.   Possibly only a few years in a lower cost school, so they had a head start on saving.

A person with a masters degree, 5 or more years of expensive higher education, might make $120,000, but are behind on the saving curve by up to 4 years over the lower earner.  They also possibly have $$$ extra in debt from student loans.

So tax the fuck out of the person with the higher income, because they earn so much.  Forget all of the other factors because that would just muddy your belief that high wage earners are just lucky.

I feel compelled to respond, because this is bullshit. I know scores of people with advanced degrees who make six figures or less. I'm one of them. Your earning potential with advanced education has far more to do with your field of study than the number of years that you opted out of the workforce to get that degree.

And no, I don't care to tax the fuck out of people with moderately high incomes. But realistically, we don't "tax the fuck" out of anyone in this country (at least on a federal level - I don't keep up with state tax laws aside from my own). Our code is especially generous to those who earn the bulk of their money from investments, and frankly we need to reign that shit in, especially on folks with dynastic levels of wealth, to share some of the burden more equitably with wage-earners.

But more to the point: You didn't see me bitching when they increased the minimum limit to the medical exemption from 7.5% to 10% of AGI a few years ago, even though it cost my family a similar amount of money on an annual basis (about $500 depending on the year) as this tax increase. Feel free to call me out for being a hypocrite the next time you see me complain about a modest tax increase. Frankly, I don't think I pay enough. I don't think you pay enough, either.

[Undecided]

Feel free to call me out for being a hypocrite the next time you see me complain about a modest tax increase. Frankly, I don't think I pay enough. I don't think you pay enough, either.

But it is ok to complain about the potential inability of social security to pay scheduled amounts? What's the difference? It just means an individual has to make and save more money to have the same resources available.

[CheapskateWife]

Maybe look at this a different way. 

1.  How much do you anticipate paying in over your lifetime?
2.  How much do you anticipate receiving over the rest of your lifetime? (use an actuarial table if you need to but all of us good mustachians plan for a long life)

Someone who wasn't typing during their already short lunch break could probably come up with a terribly clever way to calculate your gains on that investment and the likelihood that you will receive far more than you pay in.

[Spork]

Feel free to call me out for being a hypocrite the next time you see me complain about a modest tax increase. Frankly, I don't think I pay enough.

It is perfectly legal to pay more:  http://www.fms.treas.gov/faq/moretopics_gifts.html

[Mississippi Mudstache]

Feel free to call me out for being a hypocrite the next time you see me complain about a modest tax increase. Frankly, I don't think I pay enough.

It is perfectly legal to pay more:  http://www.fms.treas.gov/faq/moretopics_gifts.html

Indeed, but that's beside the point. I could contribute my entire paycheck and it would have no effect on the country's tax revenue. Everyone paying a bit more could have an appreciable impact. Especially for programs that are as crucial to members of our society (and in such grave danger of underfunding) as Social Security.

[bostonjim]

Let's be clear about something else: SS will not be solvent without tax increases or reduced benefits. This is not an unexpected development. And if you don't see any complaints in this thread, then LOL.

Wrong.  SS will be solvent as long as the government decides to cash it's own checks.  The payroll tax is a political tool to make people believe that SS is some sort of "pension" they have "paid for" instead of what it is, a transfer program.  (Not saying I disagree with it being a transfer program, just calling it what it is)  As long as there are real resources to transfer to retirees, there will never be any problems with "funding" SS.

[Mississippi Mudstache]

Let's be clear about something else: SS will not be solvent without tax increases or reduced benefits. This is not an unexpected development. And if you don't see any complaints in this thread, then LOL.

Wrong.  SS will be solvent as long as the government decides to cash it's own checks.  The payroll tax is a political tool to make people believe that SS is some sort of "pension" they have "paid for" instead of what it is, a transfer program.  (Not saying I disagree with it being a transfer program, just calling it what it is)  As long as there are real resources to transfer to retirees, there will never be any problems with "funding" SS.

Solvent: able to pay all just debts.

The social security program currently and at all times in the past has funded itself entirely through the dedicated payroll tax and the associated trust fund. If changes are not implemented, the trust fund will eventually be depleted and the OASDI payroll tax will not cover the expenses of the program that it was created to fund. Therefore, it will be insolvent. The difference could be made up by siphoning off other funds if Congress could theoretically pull it's own head out of its ass long enough pass legislation again at some indeterminate point in the future, but that won't change the fact that the payroll tax will no longer be sufficient to pay for the program for which it was created. Perhaps you will argue that the possibility of sourcing funds from other, non-dedicated tax revenue means the program will still technically solvent, but that makes you a pedant, and not "right".

::eyeroll::

[seattlecyclone]

The "trust fund" is smoke and mirrors. For some time, the payroll tax brought in more than the cost of social security benefits, so Congress spent the money on other things. They then wrote IOUs from one side of the government to another, that are currently stored in a filing cabinet in West Virginia. In the future it will be reversed: the payroll tax will bring in less than the cost of benefits, so Congress will start using increasing amounts of other tax revenue to pay for social security, and will tear up the IOUs in the process. But the key point here is that in each of the years before the "trust fund" is exhausted, Congress will need to find room in the budget to make all scheduled social security payments. I really can't see them just stopping those payments overnight once the last IOU is gone.

[Enigma]

Today the SSA announced the new earnings limit for 2017.  It will be $127,200 for 2017.  An increase of $8,700 from the 2016 level of $118,500.

You will pay $539.40 more in OASDI tax if you make over the new limit in 2017!  Am I the only one surprised at such a large jump for next year?  As a reminder, no limit on the HI portion of the tax (1.45%) plus if you make over $200,000 individual (or $250,000 MFJ) you pay an extra 0.9% in Medicare Taxes. 

Fun Fact from SS:  12 million people will pay more SS tax in 2017 under the new limit!

I didn't realize the SSA raised the limit...  thanks for the post

[ThriftyTechie]

The 7% increase is actually two years worth of increases. SSA wasn't allowed to increase the max last year because there was no COLA increase. So many of us got a tax break last year.

[Need2Save]

Yes, I read that too.  Will an extra $500+ in taxes kill our savings strategy for next year? Absolutely not. 

Just wanted to make sure others knew about the new taxable limit for planning purposes.

If anyone wants to see the history of the limit over time, here is a quick link to the SS table (but it hasn't yet been upated for 2017).
https://www.ssa.gov/planners/maxtax.html

[Drifterrider]

It is definitely the easy solution. The sad part is I will be one of those 12 million people. :-( Hopefully there will still be SS when I get to SS age.
They want the middle class to pay more and more for everything.

I would love to be one of those 12 million.