Social Security Changes

Social Security recipients get a 1.3% increase in their benefits in 2021. The earnings test limits are heading up. Individuals who turn 66 next year will not lose any benefits if they earn $50.520 or less before they reach that age.

Individuals who are 62 through 65 by the end of 2021 can make up to $18,960 before they lose any benefits. There is no earnings cap once a beneficiary turns 66.

The Social Security wage base rises next year to $142,800, a $5,100 hike. The Social Security tax rate on employers and employees stays pat at 6.2%. Both will continue to pay the 1.45% Medicare tax on all compensation, with no cap.

Individuals also pay the 0.9% Medicare surtax on wages and self-employment income over $200,000 for singles and $250,000 for couples. The surtax doesn’t hit employers.

The Kiplinger Tax Letter
October 2020