The Social Security Administration announced today that the Maximum Taxable Earnings or Social Security Wage Base would increase from $110,100 in 2012 to $113,700 in 2013.
Social Security Increases Based on CPI Change
Since there was a 1.7% increase in the Consumer Price Index (CPI-W) from the third quarter of 2011 to the third quarter of 2012, the Social Security Wage Base will also increase by 1.7%. This compares to a 3.6% increase in 2012. Wages are scheduled to be taxed at 6.2%, so the maximum tax to be paid by each employee at that rate would be $7,049.40. There is a proposal to keep the current rate of 4.2% for employees, but it has not passed at this time. About 6% of workers who pay Social Security Tax are expected to reach the maximum in 2003.
Retirement Earnings Test Exempt Amounts Increase for 2013
For workers under full retirement age who are receiving Social Security benefits, $1 in benefits is withheld for every $2 above the Retirement Earnings Test Exempt Amount of $14,640 per year or $1,220 per month in 2012. This will increase to $15,120 per year or $1,260 per month for 2013. The year an individual reaches full retirement age, $1 in benefits is withheld for every $3 above the Retirement Earnings Test Exempt Amount of $38,880 per year or $3,240 per month in 2012. This will increase to $40,080 per year or $3,340 per month for 2013. The month an individual reaches full retirement age there is no limit on earnings.
Quarter of Coverage Amounts Increases to $1,160
Also increasing for 2013 is that amount needed to earn a Social Security credit, formerly known as a quarter of coverage. In 2012, a credit is earned for every $1,130 of earnings, up to a maximum of four credits. That amount will increase to $1,160 for 2013.
Social Security Monthly Benefits to Increase in January 2013
The maximum benefit for a worker retiring at full retirement age is also increasing from $2,513 to $2,533. See the table below for other changes in Social Security benefits for 2012.
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Contact Vision Payroll if you have any questions on the Social Security changes for 2013 or get further information at Important Facts and Figures.