Social security tax rate
/What is the Social Security Tax Rate?
The social security tax rate is a flat tax that applies to all income earned by a person, up to a predetermined annual limit. The 2024 social security tax rate is 6.2% on a wage base of $168,600. This rate is paid by both the employee and the employer, for a total tax of 12.4%. For example, on earnings of $200,000 in 2024, the amount of employer tax paid would be $10,453.20, which is calculated as follows:
6.2% Tax rate x $168,600 Wage cap = $10,453.20
Since the Social Security tax is matched by the employee, the total tax amount paid to the government by the employer is 12.4%. A self-employed person is responsible for paying the full amount of the 12.4%.
At What Age is Social Security No Longer Taxed?
Social security payments are always taxable, irrespective of your age. The level of taxation depends on your income, not your age. However, Supplemental Security Income, which only applies to those with reduced incomes, disabilities, or who are over 65 years old, is not taxed.
History of the Social Security Tax
The social security tax began with the passage of the Social Security Act in 1935, which established Old Age and Survivor's Insurance. The insurance was to be funded by compulsory deductions from the pay of wage earners. Initially, these deductions were set at 1% of gross wages, and were to be paid by both the employer and the employee, and would continue until retirement age, which was set at 65. By 1948, the amount of these deductions had increased to 3%. Employers have been and continue to be responsible for withholding the social security tax from employee pay.
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Federal Insurance Contributions Act
The tax rate for social security is now governed by the Federal Insurance Contributions Act (FICA). Because of this association, social security taxes are now closely associated with the acronym "FICA".
Federal Unemployment Trust Fund
The Social Security Act also created the Federal Unemployment Trust Fund. This fund was supported by additional withholdings from employee wages, and was designed to assist the states with their unemployment insurance plans. Later updates have increased the coverage of the unemployment fund, from its original coverage of only those employees engaged in industrial or commercial occupations.
Terms Similar to Social Security Tax Rate
The social security tax is also known as the FICA tax.