|AREAS OF IMPACT||2020|
|Defined Contribution Limits||$57,000|
|Defined Benefit Limits||$230,000|
|457 Elective Deferrals||$19,500|
|Taxable Wage Base||$137,700|
Contribution and Out-of-Pocket Limits for Health Savings Accounts and High-Deductible Health Plans
|HSA contribution limit (employer + employee)||Self-only: $3,550|
|HSA catch-up contributions (age 55 or older)||$1,000|
Social Security Wage Base Increases to $132,900 in 2020
As in prior years, there is no limit to the wages subject to the Medicare tax; therefore, all covered wages are still subject to the 1.45% tax. Wages paid in excess of $200,000 will be subject to an extra 0.9% Medicare tax that will only be withheld from employees’ wages. Employers will not pay the extra tax.
The FICA tax rate, which is the combined social security tax rate of 6.2% and the Medicare tax rate of 1.45%, will be 7.65%.
The social security wage base for self-employed individuals in 2020 also will be $132,900. There is no limit on covered self-employment income that will be subject to the Medicare tax. The self-employment tax rate will be 15.3% (combined social security tax rate of 12.4% and Medicare tax rate of 2.9%) up to the social security wage base.
TCU does not review nor approve the number of exemptions claimed on your W4. In some situations, the IRS may hold the employee liable for claimed exemptions. TCU does not offer any advice in the number of exemptions claimed by employees. Each employee must rely solely upon advice from personal tax advisor for assistance.
What is FICA tax? (Federal Insurance Contribution Act)
Provides benefits for retired workers and their dependents as well as for disabled workers and their dependents.
What is Medicare tax?
Government service that helps provide healthcare for senior citizens and disabled U.S. citizens.
Who has to pay FICA/Medicare tax?
All employees except for the following:
1) Any working student registered and attending classes worth six (6) or more credit hours. 2) Qualifying Non-Resident Alien employees under tax treaty.
How are FICA and Medicare tax calculated?
FICA is 6.2% of Taxable Gross for employees and 6.2% for employers. Medicare tax is 1.45% of Taxable Gross up to $200,000 and 2.35% on wages over $200,000.
What is the FICA cap for the current year?
For 2020, that cap is $132,900.
Please refer to Publications 15 available at www. irs.gov