Whether you are an employer, or you are employed, the changes in the payroll will be of great interest to you. These changes could have a serious impact on your future, in that you could save more or find that you have to spend more. As a matter of course, every year there are some changes that are made in payroll taxes that affect both employers and employees. This year is no exception. You need to be aware of the changes to guide future actions, and make the right transitions. Employers require the latest information so that they can accurately process their payrolls. Here are the payroll changes to watch out for in 2017.
In 2016, the maximum amount of earnings that were subject to Social Security Payroll tax was at $118,500. In 2017, this number will increase by 7.3% making the maximum amount $127,200. When you look at the population of the country as a whole, this is a change that will affect a total of 12 million people. They will have to pay more in tax.
There are some adjustments being made to income tax as well. The standard deduction for heads of household is $9,350 which is an increase of $50. Then, $6,350 for singles and married couples filing separate returns which is also an increase of $50. Also, $12, 700 for married couples who are filing jointly which reveals a rise of $100.
Those who receive high compensation will have to pay a little more for Medicare than they did in 2016. The expected increase will be approximately 0.9%. The annual deductions for self-only coverage in a medical savings account increases to not less than $2,250 but not more than $3, 350, which is an increment from $3, 300.
The SSA deductions will change in 2017. In 2016, the limit on earnings was $15,720 each year. This come to approximately $1,210 each month. This has been elevated, with the limit on earnings being $16,920 which reveals on increase each month to $1,410. The extra catch-up contribution limit to an individual retirement arrangement for people who are 50 years old and above is $1,000.
The annual compensation limit, also called the salary limit, is $270,000. This is the amount of money that an employer can use in order to calculate matching contributions to their employee’s retirement plans.
There is also an increase in the maximum social security benefit for those who work until their full retirement age. While it was $2,639 each month in 2016, it has gone up to $2,687 each month in 2017.
Points worth noting
Employers should also not the following points as they are likely to be helpful in 2017.
- The salary entry of an employee that is considered well compensated by his employee should be $120,000.
- The salary package that defines an important employee in a good employment gap is $175,000.
These are the main changes to watch out for in 2017. With this information, you can begin planning your payrolls if you are an employer, and figuring out where you can make some savings if you are employed.