The Social Security Administration (SSA) recently announced that the 2023 Social Security taxable wage base will increase to $160,200 from $147,000. This means that in 2023, the maximum amount of earnings subject to the Social Security tax is $160,200.
The SSA uses the increase in average wages, also known as the Average Wage Index (AWI), to determine the taxable wage base adjustment. In 2022, the SSA estimates that average wages would be 6.5 percent higher than 2021. Comparatively, the AWI was 8.89 percent higher in 2021 than in 2020.
Additionally, the Social Security withholding rate is unchanged for 2023 and remains at 6.2 percent, up to the maximum taxable amount. The Federal Insurance Contributions Act (FICA) tax rate — which is the combined total of the Social Security tax rate and the 1.45 percent Medicare tax rate — also remains unchanged at 7.65 percent.
Also staying the same for 2023 is the additional 0.9 percent in Medicare taxes that individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly) must pay (the previously discussed tax rates don’t include that additional 0.9 percent). The amount of wages subject to the Medicare tax doesn’t have a limit.
Keep in mind that both an employer and an employee must pay Social Security and Medicare taxes. Employers must withhold and deposit the employee’s withheld taxes and pay a matching amount at the appropriate rates.
Katie Culliton, Editor, CalChamber
HRCalifornia members can read more about Standard Deductions: Taxes in the HR Library. Not a member? See how CalChamber can help you.
The Social Security taxable wage base isn’t the only thing changing for 2023. Your required California Employment Notices have mandatory updates for January 1, 2023 — pre-order now! (Preferred Members save 20 percent on compliance products and training). CalChamber’s convenient 28″ x 46″ all-in-one poster contains the 18 state and federal employment notices every California employer must post — even if you only employ one person in California. Be sure to display a poster in each business location where employees can easily see it and read it.