The US Social Security Administration (SSA) has announced that the 2021 wage ceiling is increased from USD 137,700 to USD 142,800 for the Old Age Survivors Disability Insurance (OASDI) portion of US social security taxes imposed under the Federal Insurance Contribution Act (FICA). The FICA is composed of two components: OASDI and Medicare or Hospital Insurance.
For 2021, employees are subject to OASDI tax on wages up to USD 142,800 at a rate of 6.20%. Employers are also required to pay OASDI tax for their employees at the same rate. Earnings above the wage ceiling amount are not subject to OASDI tax.
Employees and employers are also subject to Medicare tax at a rate of 1.45%, but there is no limit placed on the amount of wages subject to the Medicare tax. Individuals with wages of more than USD 200,000 (USD 250,000 for married taxpayers filing jointly and USD 125,000 for married taxpayers filing separately) pay an additional Medicare tax at a rate of 0.9% beginning in 2013.
Self-employed individuals must pay their own portion of the US social security taxes plus the portion that would otherwise be paid by an employer. The combined OASDI tax rate for self-employed individuals for 2021 is thus 12.40%, and the combined rate for the Medicare tax is 2.90%. The USD 142,800 ceiling amount applies to the OASDI tax imposed on the net earnings of the individuals from self-employment.
Note: Foreign nationals working in the United States are subject to OASDI and Medicare taxes unless exempted under a Social Security Totalization Agreement between the United States and their country of residence.