2017 Hidden Tax Hike
Social Security Tax Increase
The increase in the earnings limit for social security represents the largest one-year increase in history. The maximum social security tax is jumping from $7,346 in 2016 to $7,886 in 2017 for employees. There is a larger increase for the self-employed as their social security taxes will be increased from $14,694 to $15,773 in 2017. Self-employed individuals must pay both the employer and employee portions of social security tax.
The large increase is due to the growth in wages and the fact that last year an increase was not allowed as there was no cost of living adjustment (COLA) provided to social security beneficiaries. It is likely that further increases in the maximum amount subject to tax will increase in the future to help solve the program's problems. The potential increase in social security tax raises more questions about S Corporations and their utilization to minimize employment-related taxes.