On October 2015, the Social Security Administration, SSA, released their Social Security withholding rate for 2016. The total Social Security tax limit for 2016 was set to 7.65% for each employee and employer. This Social Security tax rate is broken out into two separate categories. The Old Age, Survivors, and Disability Insurance, also known as OASDI Tax, portion is 6.2% while the Medicare withholding portion or the hospital insurance is 1.45%.
The Maximum Taxable Earning
Our Social Security Withholding rate of 7.65% is on the high end especially the OASDI tax portion. However, the good news is that Social Security Administration did not raise the oasdi tax and med tax rates in 2016 so our total Social Security Withholding rate maintained same as 2015 SSA tax rate.
The maximum Social Security OASDI tax is still set at $118,500 with no limit on the maximum Med tax. This means the maximum Social Security Withholding rate amount remains at $7,347 in 2016.
Useful information in gauging employee’s salary
Do you know what happens if you earn more than the maximum Social Security Withholding rate? In the fall of the year, depending on when you reach the maximum OASDI tax amount, you will notice that your paycheck amount increases without alerting you, most likely about 6.2% higher. If you look and compare carefully between your pay stubs, the increase is due to reaching maximum OASDI tax amount for the year. Psychological, this increase in take home pay check brings much excitement and joy and only those who are fortunate enough to earn more than the maximum OASDI tax amount will experience this feeling of receiving increased paychecks for the remainder of the year.
Here is the trick that you can use to estimate other people’s salary…
You can ask them if they are aware of paycheck increases in November or December by about 6%? If they have no clue then it is safe to assume their salary has not reach the maximum OASDI tax.
IRS made an announcement on October 31 that they will not be making any changes to the retirement account contribution limits in 2014. This means maximum contribution pre-tax money you can add to your 401K account in 2014 will stay at $17,500 for 2014. It is important to note that the maximum contribution limit does not apply to any amount your employer contributes to your 401K. For example, my employer contributes 50% of what I end up adding to my total 401K contribution but maximum of 8% of total salary will not be counted towards the maximum limit of $17,500. Continue reading
By now, every American has heard about ObamaCare, also known as Health Care Reform. ObamaCare is a health care plan for the American that provides majority of citizen the access to health insurance that is most affordable. The health insurance is currently being offered via a Health Insurance Marketplace and the citizens can go there to receive subsidized health insurance. You may be asking why the ObamaCare is so important to Americans since most of people like us have a decent job that provides a decent health insurance. Many people do not know there are more than 40 million people who are unable to get health insurance. Believe it or not, there are people who get denied of health insurance coverage and treatment because they were sick in the past or got charged more because they were women. Now with the ObamaCare, these 40+ millions of people can get health insurance without any health discrimination.
First the good news. The government recently announced they will increase the Social Security benefits by 1.5% in 2014 for those who are already collecting social security income. The increase is slightly less than last year, which was 1.7%. Comparing to past historical data, these annual benefit increases are very low especially when the inflation is at around 1.2%. This news about the increase in the Social Security benefit is relatively good news even though it’s only 1.5%. The bad news is that the government also decided to increase the maximum base salary that is eligible for Social Security tax. Continue reading