OASDI Partially Exceeds the Cap

A portion of earnings$-$to$-$date and current earnings, when combined, exceed the wage cap.

OASDI Example $2$ has earnings$-$to$-$date of $$144,500$ and current wages of $$4,000.$ To determine how much the amount of current earnings subject to OASDI, add earnings$-$to$-$date and current wages $)=($$$148,500.$

Opening the Lock:

Do ALL earnings$-$to$-$date exceed the OASDI cap of $$147,000?$

The answer is yes and no$.$ In this scenario, earnings$-$to$-$date does not exceed the OASDI cap. BUT, adding current wages to earnings$-$to$-$date reveals that the amount does exceed the OASDI cap.

To determine how much of current wages is taxable, do the following. Starting with the OASDI cap $($$$147,000),$ subtract the combined earnings$-$to$-$date plus the current wages $).$ The result is $$1,500.$ This represents the portion that exceeds the OASDI cap.

Then, beginning with current wages, subtract the amount that exceeds the cap $($$$1,500).$ The result $($$$2,500)$ is the portion of current earnings still subject to tax. It is the amount of current wages that brings earnings year$-$to$-$date up to the OASDI cap. Last, apply the OASDI rate to wages still subject to tax, which equals $)=($$$155\mathrm{.}00.$

Looking Under Lock and Key

Note: Round to the nearest cent.

Elliott Quinn has earnings$-$to$-$date of $$138,000$ and current wages of $$9,246\mathrm{.}35.$

$\backslash$table$[[$Employee: Quinn, Elliott,$],[$Earnings$-$to$-$Date:,$$138,000\mathrm{.}00$