Small Business Questions & Answers


Filed under Managing Your Taxes

Social Security Taxes for 2013

by Noend Insight | June 11, 2013

Subject :Taxes

Dear Toolkit,

Are my Social Security taxes going up yet again in 2013?

Dear Noend Insight,

Unfortunately, yes. Everyone's employment tax bill will be higher in 2013 than in 2012 because the federal payroll tax holiday expired as of January 1, 2013.  Let's do the math.

The maximum amount of earnings subject to Social Security (FICA) and self-employment (SECA) taxes, commonly called the Social Security wage base, is $113,700 for 2013. (Remember that there's still no cap on the amount of earnings subject to the separate Medicare tax and the new Medicare surtax on higher-earning taxpayers.)

The combined rates were the same in 2012 as in 2011 because the 2011 payroll tax holiday was continued into 2012: 7.65 percent for employers, 5.65 percent for employees, and 13.30 percent for self-employed individuals. The 2013 rates return to the pre-holiday levels: 7.65 percent for employers, 7.65 percent for employees and 15.30 for self-employed individuals. 

The Social Security portion (which is capped at $113,700 in 2013) is 6.20 percent for both the employer and employer, and 12.4 percent for self-employed persons.  The Medicare portion is still 1.45 percent each, again—with no wage cap. Self-employeds must pony up 2.9 percent for the basic Medicare tax. 

Although the impact on self-employed individuals is greater (because they pay these taxes at twice the rate of employees—12.4 percent for Social Security and 2.9 percent for Medicare, for a combined rate of  13.3 percent), a self-employed individual can deduct half of any federal self-employment taxes.

However, 2013 sees the introduction of an additional Medicare tax that was enacted as part of Obamacare.  Individuals who earn more than $200,000 and married couples whose combined earnings are more than $250,000 must pay an additional 0.9 percent Medicare tax on earnings over $200,000/$250,000. As with the basic Medicare tax, there is no cap on this amount. Unlike the basic Medicare tax, the burden for paying this tax rests solely on the individual who earns the income; there is no matching employer portion.