The Cost-of-Living Adjustment for 2013 will be 1.7%. This means that social security recipients will receive a 1.7% raise beginning in January.
The wage base that is subject to FICA taxes will increase from $110,100 to $113,700. Therefore, the maximum amount of FICA tax will be $7,049.40 for the employee and employer or $14,098.80 combined.
A quarter of coverage will be based upon $1,160 of earnings.
People who retire at less than full retirement age will be allowed to earn $15,120 per year ($1,260 per month) up from $14,640 in 2012. $1 is withheld for every $2 in earnings above the limit.
In the year of attaining full retirement, the amount increases to $3,340 per month for each month before retirement age that they can earn. Once they reach full retirement, they can have unlimited earnings without penalty.
Remember that the Medicare surtax on earnings in excess of $200/$250,000 per year will apply beginning January 1, 2013. Therefore, the Medicare tax on earnings in excess of those amounts will be 3.8% instead of the current 2.9% combined rate.
Paul Neiffer, CPA