Social Security tax is a payroll deduction that funds retirement, disability, and survivor benefits

Social Security tax comes out of your paycheck automatically. Your employer withholds 6.2% of your wages, and your employer pays another 6.2% on your behalf — that is 12.4% total. If you are self-employed, you pay both portions yourself. The money goes into a federal trust fund that pays monthly benefits to people who are retired, disabled, or whose family members have died.

The tax applies only to wages up to a certain amount each year. In 2024, that cap is $168,600, which means high earners stop paying Social Security tax partway through the year. Medicare tax, which is separate, has no cap and continues on all wages.

You do not get to choose whether to pay Social Security tax. It is mandatory for nearly all workers in the United States. The only common exceptions are some government employees hired before specific dates and certain religious groups that have received federal exemptions.

Key Takeaways

  • Social Security tax is 6.2% of your wages if you are an employee, or 12.4% if you are self-employed, and it funds retirement, disability, and survivor benefits.
  • The tax only applies to wages below an annual cap, which changes each year — in 2024 it is $168,600.
  • Your employer withholds the employee portion from your paycheck; you see it listed as "FICA" or "Social Security" on your pay stub.
  • The money you pay in does not sit in an account with your name on it — it goes to a shared fund that pays current beneficiaries, and future benefits depend on your work history and age when you claim.

Where the money goes and who receives it

Social Security tax funds three separate benefit programs. The largest is retirement benefits, which pay monthly income to workers age 62 or older who have paid into the system. The second is disability insurance, which pays workers under retirement age who have a medical condition expected to last at least 12 months and prevent substantial work. The third is survivor benefits, which pay the spouse, children, or dependent parents of a worker who has died.

In 2024, about 68 million people received Social Security benefits. Roughly 48 million were retirees, 11 million were disabled workers or their family members, and 6 million were survivors of deceased workers. The average retirement benefit was around $1,907 per month, though the actual amount varies widely based on work history and the age at which a person claims.

The system is not a savings account. The taxes you pay today fund benefits for current retirees and disabled workers. When you retire, future workers' taxes will fund your benefits. This is called a "pay-as-you-go" system, and it means the program depends on having enough workers paying in to cover the people drawing out.

How your work history affects future benefits

Social Security tracks your earnings record for the entire time you work. To be may be able to access for any Social Security benefit — retirement, disability, or survivor — you must have earned enough work credits. In 2024, you earn one credit for every $1,730 in wages, up to four credits per year. Most people need 40 credits total to receive retirement benefits, which typically takes about 10 years of work.

The amount of your monthly benefit depends on your highest 35 years of earnings. Social Security calculates an average, adjusts it for inflation, and applies a formula to arrive at your primary insurance amount — the benefit you receive at your full retirement age. If you claim before full retirement age, your benefit is reduced. If you delay claiming past full retirement age, your benefit increases by about 8% per year until age 70.

You can view your earnings record and get an estimate of your future benefits by creating an account at ssa.gov. The Social Security Administration sends out statements showing your work history and projected benefits at different claiming ages. These estimates assume you continue working and earning at a similar level.

Self-employment and Social Security tax

If you are self-employed, you pay Social Security tax through self-employment tax on your net business income. You pay both the employee portion (6.2%) and the employer portion (12.4%), for a total of 15.4%. You report this on Schedule SE when you file your federal income tax return.

Self-employed people can deduct half of their self-employment tax as a business expense on their tax return, which reduces their taxable income. You still pay the full amount, but the deduction lowers your overall tax bill. Self-employment income counts toward your Social Security work credits the same way wages do.

If you have both W-2 wages and self-employment income in the same year, you pay Social Security tax on both, but only up to the annual wage cap. For example, if you earned $150,000 in W-2 wages and $30,000 in self-employment income in 2024, you would pay Social Security tax on the $150,000 in wages and on $18,600 of the self-employment income (since the cap is $168,600).

What happens if you work while receiving benefits

If you claim Social Security before your full retirement age and continue working, your benefits may be reduced. In 2024, Social Security reduces your benefit by $1 for every $2 you earn above $23,400 per year. Once you reach your full retirement age, there is no earnings limit — you can work and earn as much as you want without losing benefits.

Earnings that reduce your benefits still count toward your work record. If you have low-earning years early in your career, continuing to work and earn can replace those years in your benefit calculation, potentially increasing your future benefit amount. This is one reason some people delay claiming until they have more recent, higher-earning years to include.

If you are receiving disability benefits and work, the rules are stricter. You can earn up to a certain amount ($1,550 per month in 2024) without losing benefits, but earnings above that can end your may be able to access. The Social Security Administration has a work incentives program that allows some disabled workers to test their ability to work without immediately losing all benefits.

Changes to Social Security tax over time

The Social Security tax rate has been 6.2% for employees since 1990. Before that, it was lower — it started at 1% in 1937 and increased gradually as the program expanded. The wage cap also increases most years, tied to average wage growth in the economy. In 2023 it was $160,200; in 2024 it is $168,600.

Congress can change the tax rate or the wage cap, but it rarely does. The last major change was in 1983, when Congress raised the tax rate and began taxing a portion of benefits for higher-income retirees. Proposals to change Social Security — either to raise revenue or to adjust benefits — are politically contentious and have not passed in decades.

The Social Security Trust Fund has reserves, but the program faces a long-term funding challenge. Demographic shifts mean fewer workers per retiree than in the past. Current projections suggest the trust fund reserves will be depleted sometime in the 2030s if no changes are made, after which incoming tax revenue would cover only about 80% of scheduled benefits. This does not mean the program will disappear, but it does mean Congress will eventually have to act.

Frequently Asked Questions

Can I get my Social Security tax money back if I die before claiming benefits?

No. If you die before claiming retirement benefits, your surviving family members may receive survivor benefits based on your work record, but you do not get a refund of taxes paid. Survivor benefits go to your spouse, children under 19 (or 23 if in school), or dependent parents — not to your estate.

Do I pay Social Security tax on 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, or capital gains. Some government employees and railroad workers have their own retirement systems instead of Social Security.

What if I worked in another country — does that time count toward Social Security?

Generally, no. Work in other countries does not count toward U.S. Social Security credits unless you were working for a U.S. employer or the country has a totalization agreement with the United States. A few countries do have such agreements, which allow workers to combine credits from both countries. Check with the Social Security Administration if you have worked abroad.

Why do I see different amounts withheld from my paycheck each week?

The amount withheld depends on your gross pay that week. If you earn more in one week, you pay more Social Security tax that week. Once you hit the annual wage cap, Social Security tax stops being withheld for the rest of the year, which is why your take-home pay may increase in later months.

Can I opt out of paying Social Security tax?

No, not unless you are in one of the narrow exempted groups — certain government employees or members of recognized religious groups that have filed for exemption. For everyone else, Social Security tax is mandatory and there is no option to opt out or redirect the money elsewhere.