2020 Retirement Plan Limits Increase
Today, the IRS increased almost every major retirement plan limit as part of its annual cost of living adjustments. The increased limitations are set forth in the following chart.
Social Security Tax and Wage Base
On October 10, 2019, the Social Security Administration announced that the 2020 social security wage base will be $137,700, which is an increase of $4,800 from $132,900 for the 2019 calendar year.
The regular Medicare tax rate of 1.45% remains unchanged and applies to all income without a limitation for both the employee and employer portion. The Affordable Care Act additional Medicare tax of 0.9% remains unchanged. The additional Medicare tax applies to wages, other compensation, and self-employment income over certain dollar thresholds ($200,000 for single and $250,000 for married filing jointly). The additional Medicare tax only applies to the employee and not the employer. IRS regulations require an employer to withhold the additional Medicare tax on wages or compensation it pays to an employee in excess of $200,000 in a calendar year.