Social Security News Release

The Social Security Administration has announced that the wage base for computing the Social Security tax (OASDI) in 2012 increases to $110,100 from $106,800, which was the wage base for 2009 through 2011. The $3,300 increase, which is about 3%, is due to an increase in average total wages.

The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees, and self-employed workers—one for Old Age, Survivors and Disability Insurance (OASDI; commonly known as the Social Security tax), and the other for Hospital Insurance (HI; commonly known as the Medicare tax).

The FICA tax rate for employees and employers normally is 7.65% each—6.2% for OASDI and 1.45% for HI. However, for 2011, the OASDI rate for employees is 4.2%.

For self-employed workers, the FICA tax normally is 15.3%—12.4% for OASDI and 2.9% for HI. However, for 2011, the self-empoyment tax rate is 13.3%: 10.4% for OASDI, reflecting the two percentage point drop in the OASDI rate for employees, plus 2.9% for HI.

There is a maximum amount of compensation subject to the OASDI tax, but no maximum for HI.