When you hear Social Security tax, it refers to a payroll tax collected under U.S. law to fund Social Security programs, like retirement, disability, and survivors’ benefits.
The tax is mandatory for most workers and is separate from income tax.
Understanding the Social Security tax definition helps you see how it is calculated, who pays it, and how it affects your benefits and taxes.
What exactly is the Social Security tax?
The Social Security tax is a payroll tax levied under provisions of FICA (the Federal Insurance Contributions Act).
It is a tax on wages that employees, employers, and self-employed individuals pay to support the Social Security system.
It is one component of FICA (the other being Medicare tax). The revenues go into trust funds that pay benefits to retirees, disabled persons, and survivors of deceased workers.
How is the Social Security tax rate set and applied?
For employees, the Social Security tax rate is 6.2 % of wages up to a certain limit. Employers also pay 6.2 %, so the combined rate is 12.4 %.
If you are self-employed, you pay the full 12.4 % (both employer and employee portions) through the self-employment tax, but only on net earnings after expenses.
One caveat: only wages up to a capped amount (the wage base limit) are subject to Social Security tax in a given year. Income above that limit is exempt.
What is the wage base limit and how does it affect how much tax you pay?
The wage base limit is the maximum amount of earnings subject to Social Security tax in a given year. Any earnings above that limit are not taxed for Social Security.
For example, if the limit in 2025 is $176,100, then only the first $176,100 of your wages are taxed at 6.2 % for Social Security; beyond that, no additional Social Security tax is withheld.
This rule means higher earners effectively stop paying Social Security tax once they reach that threshold.
Who must pay the Social Security tax and who is exempt?
Most wage earners and self-employed persons must pay Social Security tax.
However, certain groups may be exempt or partially exempt:
- Some nonresident aliens working in specific roles may be exempt.
- Students employed by the school they attend in certain conditions may be exempt.
- Members of qualifying religious groups that oppose Social Security may apply for exemption under certain strict rules.
These exemptions are limited and specific, so most people will not qualify for them.
How do the collected Social Security taxes get used?
The Social Security taxes you pay are not tied to your individual account but go into trust funds that support current beneficiaries.
These funds are invested by law in special U.S. Treasury securities, which earn interest.
The system works largely on a pay-as-you-go basis: today’s workers fund today’s retirees.
How do Social Security benefits relate to the tax (are benefits taxed)?
There’s a different but related question: are Social Security benefits taxed? The answer is: sometimes.
Up to 85 % of your Social Security benefits may be taxable depending on your other income.
How much is taxable depends on your combined income, which includes your adjusted gross income, nontaxable interest, and ½ of your Social Security benefits.
If your combined income is:
- Below $25,000 (single) or $32,000 (married filing jointly), your benefits may not be taxed at all.
- Between thresholds (e.g. $25,000 to $34,000 single; $32,000 to $44,000 joint), up to 50 % of benefits can be taxed.
- Above higher thresholds (over $34,000 single; over $44,000 joint), up to 85 % may be taxed.
You report the taxable portion on Form 1040, line 6b.
What should you do to plan around Social Security taxes?
- Estimate your combined income, factoring in pensions, investments, or other income.
- Be aware that additional income (e.g., part-time work) may push you into a higher bracket for taxation of benefits.
- Use Form W-4V to voluntarily withhold federal income tax from your benefit payments (7%, 10%, 12%, or 22%) to avoid owing at tax time.
- Monitor changes in tax law, thresholds, or adjustments that may shift taxation rules.
- If your benefits are your main income, staying under income thresholds can minimize or eliminate taxation of your benefits.
