Video: What Is Social Security Tax? (2024)

FAQs

Video: What Is Social Security Tax? ›

Social Security tax is a type of payroll tax paid by employers and employees—including self-employed individuals—to fund the US Social Security program.

Social Security tax is a type of payroll tax paid by employers and employees—including self-employed individuals—to fund the US Social Security program.

Social Security tax FAQs

Social Security income can be taxable no matter how old you are. It all depends on whether your total combined income exceeds a certain level set for your filing status. You may have heard that Social Security income is not taxed after age 70; this is false.

You report the taxable portion of your social security benefits on line 6b of Form 1040 or Form 1040-SR. Your benefits may be taxable if the total of (1) one-half of your benefits, plus (2) all of your other income, including tax-exempt interest, is greater than the base amount for your filing status.

Just like the income tax, most people can't avoid paying Social Security taxes on their employment and self-employment income. There are, however, exemptions available to specific groups of taxpayers. If you fall under one of these categories, you can potentially save a significant amount of money.

If you work as an employee in the United States, you must pay social security and Medicare taxes in most cases. Your payments of these taxes contribute to your coverage under the U.S. social security system. Your employer deducts these taxes from each wage payment.

To request an exemption from Social Security taxes, get Form 4029—Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits from the Internal Revenue Service (IRS). Then, file the form with the Social Security Administration (address is on the form).

You would not be required to file a tax return. But you might want to file a return, because even though you are not required to pay taxes on your Social Security, you may be able to get a refund of any money withheld from your paycheck for taxes.

Taxes aren't determined by age, so you will never age out of paying taxes. Basically, if you're 65 or older, you have to file a tax return in 2022 if your gross income is $14,700 or higher.

Generally, if Social Security benefits were your only income, your benefits are not taxable and you probably do not need to file a federal income tax return.

Why is Social Security taxed twice? ›

The rationalization for taxing Social Security benefits was based on how the program was funded. Employees paid in half of the payroll tax from after-tax dollars and employers paid in the other half (but could deduct that as a business expense).

Unless your combined income for 2024 is less than $25,000 (less than $32,000 for married couples filing jointly), a percentage of your Social Security payments will be subject to income tax.

The ideal way to keep your Social Security benefits free from income tax is to make sure your total combined income is less than the threshold to pay tax. You can also reduce the tax burden by optimizing the savings in your retirement accounts and the order in which you tap them for income.

When you file your tax return the following year, you can claim a refund from the Internal Revenue Service for Social Security taxes withheld that exceeded the maximum amount.

Key Takeaways

Members of certain religious groups are often exempt. Most foreign academics and researchers are exempt if they're nonimmigrant and nonresident aliens. Self-employed workers who make less than $400 annually do not pay Social Security taxes.

When you have more than one job in a year, each of your employers must withhold Social Security taxes from your wages. This applies no matter what the other employers may have withheld. You may then end up with total Social Security taxes withheld that exceed the maximum.

The Social Security tax is a percentage of gross wages that most employees, employers and self-employed workers must pay to fund the federal program. Certain groups of taxpayers are exempt from paying social security tax.

Social Security is a significant benefit that helps millions of retirees, surviving spouses, and people with disabilities. The Social Security Administration adjusts benefits each year to keep up with inflation. The maximum taxable earnings for Social Security in 2024 is $168,600.

Taxes under the Federal Insurance Contributions Act (FICA) are composed of the old-age, survivors, and disability insurance taxes, also known as Social Security taxes, and the hospital insurance taxes, also known as Medicare taxes. Different rates apply for these taxes.