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Taxable Wage Base

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The taxable wage base refers to the amount of wages on which taxes are collected. The term taxable wage base is most often associated with Social Security taxes but can be used for other types of wage based taxes (e.g. state's unemployment taxable wage base). The maximum taxable wage base is set by law and is expressed in dollars. For Social Security taxes, the taxable wage base is defined as the contribution and benefit base under section 230 of the Social Security Act. The social security taxable wage base is the amount of earnings subject to social security withholding (i.e. social security portion of the Federal Insurance Contributions Act - FICA taxes). Another taxable wage base is the amount of wages subject to unemployment taxes. This taxable wage base is set by state governments (but must be equal or greater than the wage base set by the Federal Unemployment Tax Act - FUTA). The maximum amount of wages subject to Social Security tax withholding is higher than an average gross salary. As a result, for most employers, an employee's annual gross salary and taxable wage base are the same. The amount of gross salary exceeding the taxable wage base is referred to as excess wages.



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