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What is a Taxable Wage Base?

Malcolm Tatum
Updated Feb 24, 2024
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The taxable wage base is generally considered to be the maximum amount of earned salary or wages that can be assessed for the purpose of collecting Social Security taxes. While it is possible for the gross wages earned in a given period to be identical with the assessed taxable wage base, it should be understood that the two figures are not automatically always identical. Current tax laws govern how the taxable wage base relates to the total earned income for the period cited.

In general, employees do not have to be concerned with the calculation of the taxable wage base. Employers normally handle the process and deduct the appropriate amount from the gross earnings for each pay period. The deducted amount is forwarded to the Internal Revenue Service, in accordance with current regulations.

However, it is important to note that the employee is ultimately responsible for the reporting and withholding of applicable taxes, including how the wages are evaluated and taxes deducted from the gross earnings. This means that if the employer fails to follow current regulations in assessing the earnings and determining the taxable wage base properly, the employee will still be expected to make up the difference.

For many situations, this is a moot point, since the taxable wage base and the gross wages will amount to the same figure. However, if the employee earns wages that are considered to be excess wages, these may be deducted from the gross earnings. For example, if an employee earns $50,000.00 in gross wages for the period and the employer determines that $10,000.00 of that figure can properly be classified as excess wages, the employer may determine the taxable wage base is $40,000.00 and withhold Social Security taxes accordingly.

While the concept of a taxable wage base applies to Social Security taxes, this is not the case with other types of taxation. In those applications, the withholding will focus more on gross wages for the period. A good example of this would be Medicare taxes, where there is no type of cap involved.

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Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
By mdt — On Jul 20, 2008

There are FICA exemptions that may be claimed under certain circumstances. For example, college students are sometimes eligible for an exemption. Talk to the payroll department at your place of employment and see if you qualify for any type of FICA exemption. If they are not familiar with the exemptions, contact the local office of your tax agency and see if they can provide you with more details.

By carlagreen — On Jul 09, 2008

I just received my first pay check and I get paid $10/hr but i calculated it out and I get $8.10 an hour due to taxes. There are two FICA's, a Federal, and a SC Withholding tax on it. It totaled at $134 in taxes from my paycheck. Why is this.I think the FICA's stand for SS and Medicare...but i don't even use Medicare or ever will so why must i pay a portion from every paycheck? And SS is a joke..we will never see all of it...so why pay?Can I opt out of these two FICA's?

Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
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