Social Security Tax to increase in 2008

The Social Security Administration has announced that the wage base for computing the Social Security tax (OASDI) in 2008 rises to $102,000 from $97,500 in 2007, an increase of about 4.6%. The $4,500 increase is due to an increase in average total wages. Read the news release.

According to the SSA, "nearly 12 million [workers] will pay higher taxes as a result of the increase in the taxable maximum." (www.ssa.gov)

The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees, and self-employed workers—one for Old Age, Survivors and Disability Insurance (OASDI; commonly known as the Social Security tax), and the other for Hospital Insurance (HI; commonly known as the Medicare tax).

The FICA tax rate for employees and employers is 7.65% each—6.2% for OASDI and 1.45% for HI. For self-employed workers, the FICA tax is 15.3%—12.4% for OASDI and 2.9% for HI. There is a maximum amount of compensation subject to the OASDI tax, but no maximum for HI.