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What is Social Security Tax?
The Social Security Tax is a tax that employees must deduct under the Federal Insurance Contributions Act (FICA). Self-employment tax is a Social Security and Medicare Tax for self-employed individuals.
Social Security Tax is a percentage of gross income that employees, employers, & self-employed individuals must pay to fund the Social Security programs. Certain groups of taxpayers are exempt from paying the social security tax.
Social Security benefits are hidden at a maximum monthly benefit price based on earning history. The annual income earned is limited to prevent workers from paying more taxes than they can later receive in the form of benefits.
How is is Social Security Tax Calculated?
Social Security Tax is calculated by stealing a certain amount of income from each paystub you receive. The law establishes the Social Security Tax every year and applies to employers and employees.
Regarding employee compensation, social security taxes are 6.2%, whereas the total is 12.4%. The combined taxes deducted for Social Security and Medicare are known as the Federal Insurance Contributions Act (FICA).
The Social Security Tax for self-employed individuals is 12.4%. The maximum income for the Social Security Tax is $14,700, which is for the year 2022.
What is Social Security Tax Used For?
- Social Security Tax funds the retirement and disability benefits that millions of Americans receive yearly from the Social Security Administration.
- In 2022, the Social Security Tax was 12.4%, evenly distributed between employers and employees on a maximum wage base of $147,000; in 2023, it’s $160,200.
- Self-employed individuals pay the employer and employee portions of Social Security Tax, but only 92.35% of the business’s earnings.
Also, See: Social Security Administration (SSA)
