What Social Security taxes are and who pays them
Social Security taxes are payroll deductions taken from your wages while you work. Your employer matches the amount you pay. Together, these contributions fund the Social Security program, which pays retirement, disability, and survivor benefits to millions of Americans.
If you are an employee, you see Social Security tax listed on your pay stub as "FICA" (Federal Insurance Contributions Act). The current rate is 6.2% of your wages up to a yearly cap. Your employer pays another 6.2%. If you are self-employed, you pay both portions — 12.4% total — though you can deduct half of it on your tax return.
Not all income is subject to Social Security tax. Wages from a job are taxed. Investment income, rental income, and certain government pensions are not. The yearly wage cap means that once you earn above a certain amount in a single year, no additional Social Security tax is taken from your pay for the rest of that year. This cap changes each year based on wage growth.
Key Takeaways
- Social Security tax is 6.2% of your wages if you are an employee, matched by your employer, and 12.4% if you are self-employed.
- These taxes fund retirement benefits, disability benefits, and survivor benefits paid to current beneficiaries.
- A yearly wage cap means high earners stop paying Social Security tax partway through the year.
- Your work history and the taxes you paid determine how much you receive in benefits later.
- You can view your estimated benefits and tax history on your Social Security account at ssa.gov.
How your Social Security taxes fund current benefits
Social Security operates on a "pay-as-you-go" system. The taxes you pay today do not sit in an account with your name on it. Instead, they go into the Social Security Trust Fund, which when ready pays benefits to people who are retired, disabled, or surviving family members of workers who have died.
This means your taxes support your parents' or grandparents' benefits right now. When you retire, the taxes paid by younger workers will support your benefits. The system depends on enough workers paying in to cover the people receiving benefits. Demographic shifts — fewer workers per retiree — have put pressure on the program's long-term finances, but this does not change how taxes work today or how current benefits are paid.
How much you need to pay to receive benefits later
You do not need to pay Social Security taxes for your entire working life to receive benefits. You need 40 work credits to be may be able to access for retirement benefits. In 2024, you earn one credit for every $1,705 in wages (this amount changes yearly). You can earn up to four credits per year, so most people reach 40 credits in about 10 years of work.
The amount of your future benefit depends on how much you earned during your highest 35 years of work. Higher lifetime earnings mean a higher monthly benefit. If you worked fewer than 35 years, zeros are counted for the missing years, which lowers your average. Working longer can replace those zeros with actual earnings and increase your benefit amount.
You can see your own work history and estimated benefit amount by creating an account at ssa.gov. The Social Security Administration sends you a statement showing your earnings record and what you might receive at different ages.
The difference between what you pay and what you receive
For most people, the relationship between taxes paid and benefits received is not a direct one-to-one match. Social Security includes a progressive benefit formula that replaces a higher percentage of earnings for lower-wage workers and a lower percentage for higher-wage workers. This means a person who earned $25,000 per year gets back a larger share of what they paid in than a person who earned $150,000 per year.
How long you live also affects the total you receive. Someone who lives to 95 will collect far more in total benefits than someone who dies at 70, even if they both paid the same amount in taxes. This is why Social Security is sometimes called insurance — it protects you against the risk of living longer than expected and running out of money.
You can compare your own situation using the benefit estimator at ssa.gov, which shows what you might receive at age 62, your full retirement age, or age 70, based on your actual earnings record.
Self-employment and Social Security taxes
If you are self-employed, you pay Social Security tax on your net business income. You owe 12.4% for Social Security and 2.9% for Medicare (another payroll tax), for a total of 15.3% in self-employment tax. However, you can deduct half of your self-employment tax on your income tax return, which reduces your overall tax burden.
You report self-employment tax on Schedule SE when you file your income tax return. The income threshold for paying self-employment tax is $400 in net earnings. If your business earns less than that, you do not owe self-employment tax, though you may still want to file a return to claim other deductions or credits.
Self-employed workers build Social Security credits the same way employees do. Each year you pay self-employment tax, you earn credits toward the 40 needed for retirement benefits.
What happens if you work while receiving Social Security
If you start receiving Social Security before your full retirement age and continue working, your benefits may be reduced if your earnings exceed a yearly limit. In 2024, if you are under full retirement age for the entire year, Social Security reduces your benefit by $1 for every $2 you earn above the limit. The limit changes yearly.
Once you reach your full retirement age, there is no earnings limit. You can work and receive your full Social Security benefit with no reduction. This is one reason some people delay claiming benefits — they can keep working and earning, and their benefit amount grows by about 8% per year until age 70.
Frequently Asked Questions
Can I get back all the Social Security taxes I paid if I never claim benefits?
No. Social Security taxes fund the current program and cannot be refunded. If you die before claiming benefits, your heirs do not receive a refund of your taxes. However, your family members may be may be able to access for survivor benefits based on your work record.
Do I pay Social Security tax on my entire paycheck?
No. Only wages up to the yearly cap are taxed for Social Security. In 2024, the cap is $168,600, meaning once you earn that amount in a year, no more Social Security tax is taken from your pay. Medicare tax (1.45%) continues on all wages above the cap.
What if I worked in another country — do those years count toward Social Security?
It depends on the country and whether the United States has a totalization agreement with it. Some countries' work credits can be combined with U.S. credits to help you reach 40 credits. Contact Social Security directly or visit ssa.gov to learn whether your work history qualifies.
Do government employees pay Social Security taxes?
Most do, but some federal, state, and local government workers are covered by different pension systems instead. If you worked for a government agency, check your pay stub or contact your employer's human resources office to confirm whether you pay Social Security tax.
How do I know if my Social Security taxes are being reported correctly?
Create a my Social Security account at ssa.gov to view your earnings record. Review it for accuracy, especially if you changed jobs or had name changes. If you spot an error, contact Social Security with documentation like W-2 forms or tax returns to correct it.