The offset is calculated before payroll taxes are applied.
Payroll taxes are applied. Thus, increased earnings will generally raise payroll tax contributions by 7.65 percent of the earnings increase. However, the payment of these taxes could increase future SSDI and retirement benefits by boosting the participant's primary insurance amount (PIA).
Primary insurance amount (PIA). This amount is determined by the average earnings during the time in which the taxes are paid. For more details, go to http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/258/kw/primary insurance amount.