The Social Security Administration announced a 1.6 percent boost to monthly Social Security and Supplemental Security Income (SSI) benefits for 2020. The increase is based on the rise in the Consumer Price Index over the past 12 months ending in September 2019.
For those still contributing to Social Security through wages, the potential maximum income subject to Social Security tax increases 3.6 percent this year, to $137,700. A recap of the key amounts is outlined here:
- Maximum Taxable Earnings: $137,700
- Retirement Earnings Test Limits:
- Under full retirement age: $18,240 per year *
- In the year you reach full retirement age: $48,600 per year †
* $1 in benefits will be withheld for every $2 in earnings above this limit (up from $17,640 in 2019)
† Applies to earnings in months prior to attaining full retirement age. $1 in benefits will be withheld for every $3 in earnings above this limit (up from $46,920 in 2019)
- SSI Federal Payment Standard:
- Individual: $783 per month
- Couple: $1,175 per month
- SSI Student Exclusion:
- Monthly Limit: $1,900
- Annual Limit: $7,670
What does it mean for you?
- Up to $137,700 in wages will be subject to Social Security taxes, up $4,800 from 2019. This amounts to $8,537.40 in maximum annual employee Social Security payments. Any excess amounts paid due to having multiple employers can be returned to you via a credit on your tax return.
- For all retired workers receiving Social Security retirement benefits the estimated average monthly benefit will be $1,503 per month in 2020 – an average increase of $24 per month.
- SSI is the standard payment for people in need. To qualify for this payment you must have little income and few resources ($2,000 if single/$3,000 if married).
- A full-time student who is blind or disabled can still receive SSI benefits as long as earned income does not exceed the monthly and annual student exclusion amounts listed above.
Social Security and Medicare Rates
The Social Security and Medicare tax rates will not change in 2020. The employee rate will remain 7.65%, and the self-employed rate will remain 15.30%. These rates are a combination of 6.20% for Social Security and 1.45% for Medicare. There is also a 0.9% Medicare wages surtax for those with wages above $200,000 for single filers ($250,000 for joint filers) that is not reflected in the rates listed above.
Note that employers also pay Social Security and Medicare taxes on behalf of their employees. The Social Security and Medicare tax rates for the self-employed are higher because self-employed people pay both the individual and employer parts of the tax.
This article carries no official authority, and its contents should not be acted upon without professional advice. For more information about this topic, please contact our office.