Social Security tax takes 6.2 percent of your wages

Social Security tax is 6.2 percent of your gross pay, up to a yearly earnings cap. Your employer pays a matching 6.2 percent on your behalf — that 12.4 percent combined is what funds the Social Security system. The earnings cap changes each year; in 2024 it is $168,600, meaning once you earn that much in a calendar year, no more Social Security tax comes out of your paychecks for the rest of that year.

If you are self-employed, you pay both the employee and employer portions yourself, for a total of 12.4 percent. You can deduct half of that amount when you file your tax return, but you still owe the full 12.4 percent during the year.

Social Security tax appears on your pay stub as "OASDI" (Old-Age, Survivors, and Disability Insurance) or sometimes just "Social Security". It is separate from Medicare tax, which is 1.45 percent, and separate from federal income tax withholding, which varies based on your W-4 form.

Key Takeaways

  • Social Security tax is 6.2 percent of your wages, with your employer paying an equal 6.2 percent.
  • The tax only applies to earnings up to an annual cap, which was $168,600 in 2024 and increases most years.
  • Self-employed workers pay the full 12.4 percent themselves but can deduct half when filing taxes.
  • Social Security tax funds retirement, survivor, and disability benefits for current and future beneficiaries.

How the earnings cap works

Once you reach the yearly earnings limit, your employer stops taking Social Security tax from your paycheck. If you earn $168,600 in 2024, Social Security tax stops coming out after you hit that amount. If you change jobs mid-year and your new employer does not know you already paid in on $100,000 at your old job, you may overpay — but you can claim the overage as a credit on your tax return.

The cap is indexed to wage growth, so it typically rises each January. In 2023 it was $160,200; in 2024 it became $168,600. The Social Security Administration announces the new cap in October of the prior year, so you can see it coming.

High earners pay the same 6.2 percent rate as everyone else, but they pay it on a smaller portion of their total income because of the cap. Someone earning $500,000 pays Social Security tax on only $168,600 of it, while someone earning $80,000 pays on all $80,000.

Self-employed Social Security tax

If you work for yourself, you owe both the employee and employer share of Social Security tax — 12.4 percent total. You calculate this on your Schedule SE form when you file your tax return, based on your net self-employment income (your business income minus business expenses).

The good news is that you can deduct half of your self-employment tax when you calculate your adjusted gross income. This reduces your federal income tax burden. You still owe the full 12.4 percent to Social Security, but the deduction lowers your overall tax bill.

Self-employed workers pay this tax when they file their return or through quarterly estimated tax payments if they expect to owe more than $1,000 in taxes for the year. The same yearly earnings cap applies — once your net self-employment income reaches $168,600 in 2024, no more Social Security tax is due on income above that.

Social Security tax versus Medicare tax

Social Security tax and Medicare tax are often confused because they both come out of your paycheck and both fund federal programs. Social Security tax is 6.2 percent (employee) plus 6.2 percent (employer). Medicare tax is 1.45 percent (employee) plus 1.45 percent (employer), and it has no earnings cap — you pay it on all your wages no matter how much you earn.

There is also an additional Medicare tax of 0.9 percent that applies to wages over $200,000 for single filers and $250,000 for married couples filing jointly. This extra tax is only on the employee side and has no employer match.

Together, Social Security and Medicare taxes are often called FICA taxes (Federal Insurance Contributions Act). Your pay stub should break them out separately so you can see exactly how much goes to each program.

What Social Security tax funds

Your Social Security tax payments go into a trust fund that pays benefits to current retirees, disabled workers, and survivors of workers who have died. You are not building a personal account — the money you pay in today goes out to beneficiaries today. When you retire, future workers' Social Security taxes will fund your benefits.

To receive Social Security retirement benefits, you must have worked and paid into the system for at least 10 years (40 quarters). Your benefit amount depends on your earnings history and the age at which you claim. Disability and survivor benefits have different requirements but also depend on your Social Security tax contributions.

The Social Security Administration publishes an annual statement showing your earnings record and an estimate of what you might receive at different claiming ages. You can view this online at ssa.gov if you create a my Social Security account.

How to read Social Security tax on your pay stub

Look for a line labeled "Social Security" or "OASDI" on your pay stub. Next to it should be two numbers: the amount withheld from your pay and the year-to-date total. The withheld amount is 6.2 percent of your gross pay (before any deductions), unless you have already hit the yearly earnings cap.

If you are paid biweekly and earn $2,000 per paycheck, your Social Security tax should be about $124 per check ($2,000 × 0.062). If that number looks wrong, check whether you have already maxed out the earnings cap earlier in the year.

Your employer's matching contribution does not appear on your pay stub — it is a separate cost to them. But it is part of your total compensation and counts toward your Social Security earnings record.

Frequently Asked Questions

Why do I pay Social Security tax if I might not get benefits?

Social Security tax funds current retirees and disabled workers, not just your future retirement. Even if you never claim retirement benefits, your payments support the system for others. You also build credits toward disability and survivor benefits, which your family could receive if you become disabled or die.

Can I opt out of Social Security tax?

No, Social Security tax is mandatory for all employees and self-employed workers. Some government employees hired before 1984 may be exempt, but most workers cannot opt out. The tax is set by federal law and applies to nearly all wages.

What happens to Social Security tax if I work multiple jobs?

Each employer withholds 6.2 percent based on what you earn at that job, without knowing about your other income. If your combined earnings exceed the yearly cap, you may overpay. You can claim the overage as a credit on your tax return when you file.

Does Social Security tax explore to all types of income?

Social Security tax applies to wages and self-employment income. It does not explore to investment income, interest, dividends, or capital gains. If you have a side business, only the net profit counts toward the earnings cap.