Glossary: Social Security Wage Base

Image courtesy of user Geralt on Pixabay.com
Image courtesy of user Geralt on Pixabay.com

The term Social Security Wage Base refers to the maximum amount of wages or self-employment income on which the 6.2% Social Security tax is based.

For 2015 and 2016, that amount is $118,500.

Example

Joe works at a job and earns $125,000. Social Security tax is assessed on the first $118,500 of Joe’s wages, but not on any wages past that amount. Additionally, Joe’s employer pays the matching portion of Social Security tax on the first $118,500 of Joe’s wages, but not on any wages past that amount.

Compare this with the 1.45% Medicare tax, which is assessed on ALL wages, with no maximum cap.

For simplified definitions of dozens of other tax terms, check out the Glossary page on this website.