The 2024 FICA Limit on Paystubs [UPDATED]

2024 FICA Limit on Paystubs and the COLA rates
Kristen Larson
By Kristen Larson
January 12, 2024

As a business owner and an employer, you’re required to stay up to date with changes introduced by the Social Security Administration (SSA). In 2024, SSA has changed a couple of things that pertain to paystub generation. The administration has outlined some of the key changes here.

To make the task of paystub generation easier, we’ve summarized the novelties and provided some tips on paystub generation. Here are some of the key essentials you need to know about the 2024 FICA limit on paystubs.

Read: What is FICA?

Key Paystub-Related Changes to Pay Attention to in 2024

SSA has announced a few important things that employers should keep in mind when generating paystubs for their workers.

As per the announcement, the social security wage base in 2024 has been increased to 168,600 dollars. The change from the 2023 base is 6,600 dollars. What has remained the same is the absence of a limit on wages subject to Medicare tax. This means that all covered salaries will be subjected to a taxation amount of 1.45 percent.

The 2024 FICA tax rate has been set at 6.2 percent. The maximum social security tax is limited to $10,453.20.

Social Security Taxes: What You Need to Know

The so-called social security tax applies to employers, employees and all self-employed professionals in the US.

What the tax aims is to provide funding for the payment of benefits for Social Security recipients and their survivors.

The social security tax is one of the payroll taxes known as the Federal Insurance Contributions Act (FICA) taxes. Apart from it, the FICA package also includes the Medicare tax.

Both the employer and the employee pay the social security tax. The total percentage is 12.4 percent and it’s split between both entities (6.2 percent each).  The total Medicare tax rate is 2.9 percent, meaning that both the employer and the employee have to provide 1.45 percent. SSA has provided a comprehensive FICA overview you can check out to familiarize yourself with the key numbers and percentages.

You may be interested: What is SUTA? Tax Rates, Obligations, Calculations 

Managing the New 2024 FICA Limit on Paystubs

We’ve discussed paystub generation before and we’ve discussed the importance of customization.  To stay compliant with payroll taxes, you have to keep track of new SSA announcements and reflect those in the paycheck stubs that you generate (regardless of how your employees are being paid).

For 2024, the FICA limit on paystubs is 168,600 dollars. This means that any income earned over this amount isn’t subjected to taxes. Knowing the limit is important to make accurate calculations and withholdings.

Given this new FICA limit, the maximum amount an employee and an employer will have to pay is 10,453.20 dollars each. For self-employed individuals, the amount is 20.906 dollars because they cover 12.4 percent of 168,600 dollars on their own.

As already mentioned, the Medicare tax isn’t subjected to a wage limit. The rate of 1.45 percent per employer and employee will have to be calculated, no matter how small or big the individual payment is.

Keep in mind, however, that employees who earn high wages may be subjected to an additional Medicare tax of 0.9 percent. This additional tax affects solely the employee and it doesn’t impact the amounts that employers have to pay.

The additional high income Medicare tax applies in various circumstances. These include:

  • Singe individuals who earn more than 200,000 dollars per year

  • Head of household (with qualifying person) who earns 200,000 dollars per year or more

  • Married couples filing jointly and earning more than 250,000 dollars

  • Married couples filing separately and earning wages of over 125,000 dollars

  • Qualified widowed individuals with a dependent child earning more than 200,000 dollars

Additional Changes

Apart from the 2024 FICA limit on paystubs that we’ve already discussed, there are a few additional changes that the SSA has announced. While these aren’t applicable to all employees and self-employed professionals, they’re still worth mentioning.

The Cost of Living Adjustment (COLA) in 2024

COLA is an adjustment that’s made each year to the Social Security benefit amount. The Department of Labor is responsible for the creation of the annual Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) – the document upon which the COLA adjustment is based.

For 2024, the COLA has been announced at 3.2 percent. As per national statistics, 71 million people in the US will see an increase in their Social Security payments.

Additionally, employees who receive benefits before they reach the full retirement age (FRA) are always the subject of the retirement earnings test. This means that an income exceeding a certain amount will trigger benefits withholdings until the FRA is reached. This is another threshold that’s modified on an annual basis to reflect changes in economy and national finances.

There are two earnings test exempt amounts. The one is applicable to individuals who are younger than the retirement age and the other amount applies to those who are reaching the FRA over the course of the respective fiscal year. In 2024, the first amount is 22,320 dollars and the second one is 59,520 dollars.

To put that in simple terms – a person that earns 22,320 dollars or less (alternatively – 59,520 dollars or less) per year in 2024 will be eligible to receive Social Security benefits.

Stay on Top of Your Paystubs

Armed with this information, you’ll easily ace paystub generation.

One final thing you’ll need to do is choose the right paystub platform. With such software, you can simplify the process of template creation and data entry. It’s also easy to introduce your brand identity and personalize paycheck stubs in any way you deem appropriate.

It doesn’t matter how many people your company employs. Staying on top of payroll documentation will save you time in the end of the fiscal year and reduce the risk of costly mistakes. All of this may sound like too much but once you make your choice and review SSA changes periodically, you’ll ace the paystub generation game.

Read: Everything you need to know about paystubs

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