Social Security Withholding in 2020

Social Security Withholding in 2020

Beginning in 1983, monthly Social Security payments have been taxed above specific income thresholds. The Old-Age, Survivors, and Disability Insurance (OASDI) program is what limits the amount of earnings that are subject to taxation in any given year.

The amount of income that is subject to taxation changes yearly. In 2020, the maximum limit on earnings for Social Security withholding tax is $137,700, which is an increase of almost $5,000 compared to 2019.

The overall Social Security tax rate has remained consistent at 6.2%. Therefore, the most that you will pay in Social Security tax for 2020 is $8,537.40. There is no limit on the amount of earnings subject to Medicare tax, and your wages will be taxed by Medicare at a rate of 1.45%.

The United States government provides a cost of living adjustment (COLA) each year as well. In 2020, beneficiaries of Social Security or Supplemental Security Income monthly payments received a COLA at 1.6%. A formula based on cost of living increases is what determines how the maximum withholding amount is adjusted each year.

Beyond the income thresholds, individuals who earn more than $200,000 or married couples filing jointly that earn more than $250,000 pay an additional 0.9% in Medicare taxes, as of January 2013.

Self-employed individuals are taxed at a different rate. In 2020, the self-employment tax rate is 15.3%; therefore, the most that self-employed individuals will pay in Social Security taxes is $17,074.80.

Rather than paying your Social Security tax bill all at once, you can specify that you want your taxes withheld from your monthly benefit payments when you file your claim for Social Security. If you have taxes withheld on a monthly basis, you’ll also avoid a penalty if it turns out you underpaid the entire year.

One thing to note: because Supplemental Security Income is a means-tested program that is not based on wages earned, these benefits are exempt from a variety of payments, including child support garnishment and income withholding.