The Federal Insurance Contributions Act changes on a yearly basis. The amounts employees and other individuals must pay into programs such as Social Security, Medicare and Supplemental Security Income can vary, based on each agency's funding needs. There were a lot of adjustments made in 2015 to take into account the enactment of particular provisions of the Affordable Care Act. With this in mind, what changes were in store for FICA in 2016? As it turns out, very few adjustments happened. For the vast majority of businesses in the United States, the situation is unchanged. This means a payroll manager has little to worry about.
The more things change
There were only two adjustments for FICA rates and thresholds for 2016, according to the IRS. These changes relate to election workers and domestic household workers such as nannies, cleaners and other similar employees. The former is important, since 2016 is a presidential election year.
For election workers, the threshold to pay for Social Security and Medicare increased. Now, they must earn at least $1,700 before they pay taxes for these two benefits, up from $1,600. Domestic household workers also received an increase in their threshold, from $1,900 to $2,000.
The more they stay the same
Otherwise, practically everything else in the FICA rates and thresholds remains unchanged, for there were no cost of living adjustments. Employers and employees should expect to pay 6.2 percent of their compensation to Social Security. This contribution has a taxable earning limit of $118,500 dollars.
For Medicare, employees and employers will pay 1.45 percent of their compensation in taxes. There is no limit on maximum taxable earnings. For those employees exceeding $200,000 in compensation, there is an additional 0.9 percent tax on Medicare. This brings the total rate to 2.35 percent.
Self-employed persons keep their total taxable pay rate of 15.3 percent, with 12.4 percent for Social Security and 2.9 percent for Medicare. The maximum amount a self-employed worker would pay into Social Security is $14,694.
For those around retirement age, the means test remains the same. The maximum earnings exempt limit while under retirement age – which is still 66 – is $15,720. In the year a person reaches the age of retirement, the exempt limit is $41,880 in the months before that birthday and no limit after. The maximum monthly benefit for workers at full retirement age is $2,639.
Supplemental Security Income remains the same as well. The payment standard is $733 for individuals and $1,100 for couples. Resource limits are $2,000 for individuals and $3,000 for couples.