October 19, 2011 update: the expected wage base increase has been confirmed as $110,100 for 2012. For more information, see this article.
The Social Security Administration has released the proposed figures for the increase in the wage base for taxation for 2012 and projected some figures for the years up to 2015. This is the limited amount of income against which Social Security withholding tax is applied.
For 2009 through 2011, the wage base has been static – at $106,800 for each year. The amount did not increase for these years since the average wage index (AWI) actually decreased from 2008 to 2009, and the modest increase in the index from 2009 to 2010 did not make up for the decrease in the prior year. For 2011, the AWI is expected to increase once again, by 3.08%. This sets the projected wage base for 2012 at $110,100, up a total of $3,300.
Future wage bases have been projected for the years up to 2015 as well: for 2013, the base is projected at $113,100; for 2014, $117,600; and for 2015, $122,700.
Keep in mind that these are, at present, only projections. The actual figures will be set in the fall, typically in October or November.
Also – in 2012, the temporary 2% reduction in the Social Security withholding tax will expire, so if the projected wage base of $110,100 does go into play, then the maximum amount of Social Security withholding that you can be assessed for the 2012 tax year will be $6,826.20, up from $4,485.60 in 2011.
For more information, see this article at Social Security Owner’s Manual.
Photo by runranThe latest edition of A Social Security Owner's Manual, 2013 Edition, can be purchased by clicking this link. If you'd prefer the Kindle version (and let's face it, ALL the cool kids do!), you can find that at this Kindle version link.