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SSA Announces COLA and Max Earnings for 2021

 

The Social Security Administration typically updates key numbers for the upcoming year in the fall. One of the key numbers for retirees is the cost-of-living change: A 1.3% increase will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2021. Increased payments to more than 8 million SSI beneficiaries will begin on Dec. 31, 2020. The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor's Bureau of Labor Statistics.

Some other adjustments that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (the "taxable maximum") will increase to $142,800 from $137,700. As in the past, that ceiling applies only to the Social Security portion (the OASDI), which is 6.20%. There is no earnings ceiling for the 1.45% Medicare portion.

Nor are the rates themselves changing: Employees will continue to pay 7.65% and self-employed workers will continue to pay the full 15.30%. Individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly) will continue to pay an additional 0.9% in Medicare taxes.

A full summary of all changes is available at the SSA site.

 

 
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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