The Social Security wage base will be increased to $127,200 in 2017. This is a $8,700 increase over the current wage base. The Social Security tax of 6.2% and the Medicare tax of 1.45% will be applied to compensation up to those levels and paid by each employee. Your employer will also pay the same amount of tax on your income for a total of 15.3% in taxes on your salary up to the wage base.
If you are a business owner, consider discussing with your CPA whether you might be able to decrease your salary below the wage base. You could make up the lost income by receiving S-Corporation distributions, (assuming you have elected S- Corporation status), or increasing the rent paid to you by your business (assuming you personally own the property and lease it back to your business). Often you cannot justify a very low salary if you are profitable, but if you are starting a new business without a long track record of profits, then this strategy is more appropriate.
To continue this discussion, Don Hannahs can be reached at firstname.lastname@example.org
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Don is a Certified Financial Planner (CFP) and has been in the advisory business since 1987. He is a founding partner of Planning Solutions Group, which was formed in 2001. Planning Solutions Group is a leader in family wealth management comprised of 30 employees and over 1,500 clients with offices in Maryland and Virginia Beach. Don’s practice focuses in the areas of wealth management, business continuity planning, fringe benefit design, and estate planning.
Don is a frequent speaker/educator who empowers high net worth business owners. He provides educational workshops and seminars throughout the nation at Colleges, Universities, Clubs, and Associations including Christopher Newport University, Montgomery College, and Johns Hopkins University. He has been a featured speaker for many trade associations including, the DC Bar, Associated Builders & Contractors, Johns Hopkins University-Physicians, Maryland Dental Association, Intermodal Association, National Electrical Contractors Association, Printing & Graphics Association, Virginia Association of Roofing Professionals, and Air Conditioning Contractors Association, and Northeast Equipment Dealers Association. Don is a regular instructor at the NADA (National Automobile Dealers Association) Academy helping dealer candidates and family businesses transition to the next generation. He has been a guest on CNNFN’s TV show for Entrepreneurs Only, as well as a radio guest on WTOP, WEAA, WPGC and on WBAL Radio’s Ron Smith Show.
Don sits on the Board of Hampton Roads Financial Planning Association. He volunteers for the “500 Financially Fit Families Program” in Virginia Beach helping mentor citizens on budgeting and paying off debt. He formerly sat on the Board of Directors for the Johns Hopkins Bayview Burn Center and is a former Board Member of the Easter Seals Foundation of Central Maryland. Don is also the past president of the board of trustees at his church. Don has been recognized as a Five Star Wealth Manager for two consecutive years.