The Social Security tax rate and how it's calculated

Social Security tax is 12.4% of your wages, but you and your employer each pay half. If you're an employee, 6.2% comes out of your paycheck, and your employer pays the other 6.2%. If you're self-employed, you pay the full 12.4% yourself, though you can deduct half of it when you file taxes.

The tax applies only to wages up to a certain limit, which changes each year. For 2024, you pay Social Security tax on the first $168,600 of your income. Once your wages hit that cap, no more Social Security tax is taken out for the rest of that year. This means higher earners pay a smaller percentage of their total income into Social Security than lower earners do.

Your employer withholds the 6.2% automatically from each paycheck. You'll see it listed on your pay stub as "OASDI" (Old-Age, Survivors, and Disability Insurance) or simply "Social Security tax." The amount changes slightly each month if your pay varies, because it's calculated on each individual paycheck, not as an annual lump sum.

Key Takeaways

  • Employees pay 6.2% of their wages in Social Security tax, and employers pay another 6.2%, for a total of 12.4%.
  • Self-employed people pay the full 12.4%, but can deduct half of it as a business expense on their tax return.
  • The tax only applies to wages below an annual cap, which was $168,600 in 2024 and increases most years.
  • Once your wages reach the cap in a given year, no more Social Security tax is withheld from your remaining paychecks.

What the annual wage cap means for your taxes

The wage cap is the maximum amount of income subject to Social Security tax in a single year. In 2024, that cap is $168,600. This means if you earn $200,000 in a year, you only pay Social Security tax on the first $168,600. The remaining $31,400 is not subject to Social Security tax.

The cap increases most years based on average wage growth in the economy. It went up from $160,200 in 2023 to $168,600 in 2024. If you work for multiple employers in the same year, each employer withholds Social Security tax independently until you hit the cap across all jobs combined. You may end up overpaying, but you can claim the excess as a credit on your tax return.

People who earn below the cap pay Social Security tax on 100% of their wages. People who earn above it pay a smaller percentage of their total income, which is why the system is sometimes described as regressive at higher income levels.

How self-employed workers calculate their Social Security tax

If you're self-employed, you pay both the employee and employer portions of Social Security tax. This is called self-employment tax, and it totals 15.3% (12.4% for Social Security plus 2.9% for Medicare). You calculate it on Schedule SE, which you file with your tax return.

Self-employment tax is based on your net profit from self-employment, not your gross revenue. You subtract business expenses from income to get the net profit, then apply the 15.3% rate to that number. The wage cap still applies — you only pay the 12.4% Social Security portion on net self-employment income up to $168,600 in 2024.

The IRS lets you deduct half of your self-employment tax as an adjustment to income on your tax return. This reduces your taxable income and partially offsets the burden of paying both sides of the tax. Many self-employed people set aside money each quarter to cover this tax, since it's not withheld automatically like it is for employees.

Social Security tax versus Medicare tax

Social Security tax and Medicare tax are separate payroll taxes, though they're often discussed together. Social Security tax is 6.2% (employee) or 12.4% (self-employed). Medicare tax is 1.45% (employee) or 2.9% (self-employed). Together, they make up what's called FICA tax.

Medicare tax has no wage cap — it applies to all your wages, no matter how much you earn. However, there's an additional 0.9% Medicare tax on wages above $200,000 (single filers) or $250,000 (married filing jointly). This extra tax was added in 2013 and applies to both employees and self-employed workers.

Social Security tax funds retirement, disability, and survivor benefits. Medicare tax funds hospital insurance and other medical coverage for people 65 and older. They're collected together on your paycheck but go into separate trust funds and pay for different programs.

How your Social Security tax translates to future benefits

The amount you pay in Social Security tax over your working years determines how much you can receive in retirement benefits later. The Social Security Administration tracks your earnings record and uses your highest 35 years of income to calculate your benefit amount. Higher lifetime earnings generally mean higher benefits.

You need 40 credits to be covered by Social Security. You earn one credit for each $1,730 of wages in 2024 (this amount changes yearly). Most people earn four credits per year, so 40 credits takes about 10 years of work. Once you have 40 credits, you're covered for retirement benefits whenever you reach full retirement age.

Your actual benefit amount depends on when you start taking benefits. If you start at full retirement age (66 to 67, depending on your birth year), you get your full benefit. If you start earlier, at 62, your benefit is reduced. If you delay until 70, your benefit increases. The Social Security Administration sends you an annual statement showing your estimated benefits at different ages.

What happens if you work multiple jobs

If you have more than one job in the same year, each employer withholds Social Security tax independently. This can lead to overpayment if your combined wages exceed the annual cap. For example, if you earn $100,000 at one job and $80,000 at another, both employers will withhold Social Security tax on their full amounts, even though your combined income of $180,000 exceeds the 2024 cap of $168,600.

When you file your tax return, you can claim a credit for the excess Social Security tax withheld. The IRS will refund the overpayment. You calculate this on Form 1040 by adding up all the Social Security tax withheld across all jobs and comparing it to what you should have paid based on the annual cap.

This situation is common for people who change jobs mid-year or work seasonal positions. Keep track of your total wages and Social Security tax withheld across all employers so you can claim the credit accurately when you file.

Frequently Asked Questions

Does Social Security tax apply to all types of income?

No. Social Security tax applies only to wages and self-employment income. It does not apply to investment income, rental income, interest, dividends, or capital gains. If you have a mix of income types, only the wages and self-employment portions are subject to Social Security tax.

Can I opt out of paying Social Security tax?

No. Social Security tax is mandatory for all employees and self-employed people. The only exceptions are certain religious groups that have received a waiver and some government employees hired before specific dates who are covered by different pension systems instead.

What if I didn't pay Social Security tax for some years?

Those years count as zero-earnings years in your Social Security record. Since your benefit is based on your highest 35 years of earnings, having years with no income will lower your average. You can view your earnings record on your Social Security account at ssa.gov to see which years are recorded.

Is the Social Security tax rate the same every year?

The rate has been 6.2% for employees (and 12.4% for self-employed) since 1990. The rate does not change year to year. However, the wage cap increases most years based on average wage growth, so the maximum amount you pay can increase even if the percentage stays the same.