Social Security taxes fund retirement, disability, and survivor benefits

Social Security tax is a payroll tax taken from your wages to fund the Social Security program. The program pays monthly benefits to people who are retired, disabled, or whose family members have died. If you work as an employee, your employer withholds 6.2% of your gross pay for Social Security tax. If you are self-employed, you pay both the employee and employer portions—12.4% total—when you file your taxes.

The money you pay in Social Security taxes goes into a trust fund that the government uses to pay current beneficiaries. You do not have a personal account that grows over time. Instead, your tax payments support people receiving benefits right now, and future workers' taxes will support your benefits when you become may be able to access. The Social Security Administration tracks how much you have paid throughout your working life to calculate your benefit amount later.

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.
  • Your employer withholds Social Security tax automatically from your paycheck, and you can see the amount on your pay stub labeled as "FICA" or "Social Security."
  • Only earnings up to a certain annual limit are subject to Social Security tax; in 2024 that limit is $168,600, though this amount changes each year.
  • The taxes you pay are recorded under your Social Security number, and the Social Security Administration uses your payment history to determine your future benefit amount.
  • You must have earned at least 40 credits (roughly 10 years of work) to be may be able to access for retirement or disability benefits based on your own work record.

How Social Security tax appears on your paycheck

When you receive your pay stub, look for a line labeled FICA (Federal Insurance Contributions Act). This line shows two separate deductions: one for Social Security and one for Medicare tax. The Social Security portion will be labeled "Social Security" or "OASDI" (Old-Age, Survivors, and Disability Insurance). The amount deducted is 6.2% of your gross pay, calculated before most other deductions.

Your employer is required to withhold this amount and send it to the federal government on your behalf. You do not have a choice about whether to pay it—it is a mandatory deduction for all employees. If you have multiple jobs, each employer withholds 6.2% from your wages at that job. This means if your combined earnings exceed the annual wage cap, you may pay more Social Security tax than necessary, but you can claim a credit when you file your income tax return.

The annual wage cap and how it affects your taxes

Not all of your earnings are subject to Social Security tax. The government sets an annual wage cap—the maximum amount of income that can be taxed for Social Security in a given year. In 2024, that cap is $168,600. This means if you earn $200,000 in a year, Social Security tax is only withheld on the first $168,600. The remaining $31,400 is not subject to Social Security tax.

The wage cap increases most years because it is tied to the average wage growth in the country. This means the cap for 2025 will be higher than 2024, and so on. If you are self-employed, you calculate your Social Security tax on your net self-employment income up to the same annual cap. High earners pay a smaller percentage of their total income in Social Security tax than lower-wage workers, because once they hit the cap, no more is withheld.

Self-employment and Social Security taxes

If you are self-employed—meaning you own your own business or work as a freelancer or contractor—you pay both the employee and employer portions of Social Security tax. This is called self-employment tax, and it totals 12.4% for Social Security (plus 2.9% for Medicare). You calculate this tax on your net self-employment income, which is your business income minus allowable business expenses.

You pay self-employment tax when you file your annual income tax return using Schedule SE. The good news is that you can deduct half of your self-employment tax as a business expense on your tax return, which lowers your overall tax burden. Like employees, self-employed people are also subject to the annual wage cap—only the first $168,600 of net self-employment income (in 2024) is subject to the 12.4% Social Security portion.

How your Social Security tax payments build your future benefit

The Social Security Administration maintains a record of your earnings and tax payments under your Social Security number. Each year you work and pay Social Security tax, you earn credits toward future benefits. In 2024, you earn one credit for each $1,730 of wages or self-employment income, up to a maximum of four credits per year. You need 40 credits total to be may be able to access for retirement benefits, which typically takes about 10 years of work.

When you reach retirement age or become disabled, the Social Security Administration calculates your benefit amount based on your 35 highest-earning years. The more you earned during those years, the higher your monthly benefit will be. If you have fewer than 35 years of earnings, zeros are counted for the missing years, which lowers your average. This is why working longer and earning more can increase your eventual benefit amount.

Social Security taxes and disability or survivor benefits

Social Security tax does not only fund retirement benefits. A portion of the tax you pay goes toward the Disability Insurance Trust Fund, which pays benefits to workers who become disabled before retirement age and to their family members. Another portion funds the Survivors Insurance Trust Fund, which pays benefits to the family members of workers who die, including spouses, children, and parents depending on the situation.

You do not need to be retirement age to receive these benefits. If you become disabled and have earned enough credits, you can receive disability benefits. Your spouse, children, and parents may also receive survivor benefits if you die, even if you have not yet retired. The amount they receive is based on your earnings record and the Social Security tax you paid throughout your working life.

What happens if you do not pay Social Security taxes

If you work as an employee and your employer does not withhold Social Security tax, that is illegal. You should report this to the Social Security Administration or the Department of Labor. However, you are still responsible for paying the tax yourself if it was not withheld—you cannot avoid the obligation by working for an employer who fails to comply.

If you are self-employed and do not pay self-employment tax, you will owe it when you file your tax return, plus interest and penalties if the IRS discovers the unpaid tax. Not paying also means you do not earn credits toward future Social Security benefits. Working without paying into the system means you will not be may be able to access for retirement, disability, or survivor benefits later, unless you have other ways to may have access to.

Frequently Asked Questions

Can I opt out of paying Social Security taxes?

No, Social Security tax is mandatory for all employees and self-employed people. The only exceptions are certain government employees hired before 1984 who are covered by a different retirement system, and some religious groups that have received a specific exemption from the government. If you are a regular employee or self-employed, you must pay.

What if I work multiple jobs—do I pay Social Security tax on all of them?

Yes, each employer withholds 6.2% from your wages at that job. If your combined earnings exceed the annual wage cap, you will overpay Social Security tax. You can claim a credit for the overpayment when you file your income tax return, and the IRS will refund the extra amount.

Does Social Security tax go into my personal account?

No. Social Security tax goes into a trust fund that pays current beneficiaries. The government does not set aside a personal account with your name on it. Your payment history is recorded, and it determines how much you will receive in benefits, but the money you pay today funds benefits for retirees and disabled workers right now.

What if I did not work long enough to earn 40 credits?

You will not be may be able to access for retirement or disability benefits based on your own work record. However, you may be may be able to access for benefits as a spouse, ex-spouse, or family member of someone who has earned 40 credits. Contact the Social Security Administration to learn about other ways you might may have access to.

Does the wage cap mean rich people pay less in total?

Yes. Because Social Security tax only applies to earnings up to the annual cap, high earners pay a smaller percentage of their total income in Social Security tax than lower-wage workers. For example, someone earning $50,000 pays tax on all of it, while someone earning $500,000 pays tax on only the first $168,600 of earnings.