You must generally contribute to the Old Age, Survivors, and Disability Insurance (OASDI) program, otherwise known as Social Security, throughout your entire working life. You must pay the Social Security tax whether you're an employee or self-employed. There are a few exceptions, however.
Key Takeaways
- Most American workers have to pay Social Security taxes for as long as they're working.
- Social Security taxes are collected as part of FICA, which also includes Medicare taxes.
- The income threshold for Social Security and Medicare taxes is adjusted annually for inflation.
- There are a few exceptions for paying into Medicare, including members of certain religious groups and some types of nonresident aliens.
- Federal employees hired before 1984 may also be exempt because they pay into a separate retirement system.
Basics of Social Security Withholding
Your paycheck will likely show an amount withheld for the Federal Insurance Contributions Act (FICA) if you work for an employer. FICA includes both Social Security and Medicare, the federal health insurance program for Americans age 65 and over.
Your wages up to $168,600 are taxed at 6.2% for Social Security as of 2024. Your wages are taxed at 1.45% for Medicare and there's no limit on earnings. Your employer matches these amounts and sends the total to the government on your behalf.
You have to pay both halves if you work for yourself because you're effectively both the employee and the employer. This is known as the Self-Employed Contributions Act (SECA) tax.
Who Doesn't Have to Pay Social Security?
The federal government provides a few exceptions for mandated payment of the Social Security tax.
High Earners
High earners pay Social Security on only a portion of their incomes. Their Social Security withholding stops for the year when their incomes hit a certain threshold known as the wage base. This limit changes every year to keep pace with inflation. The 2024 limit for paying FICA taxes is $168,600.
Members of Some Religious Groups
Some workers are exempt from paying Social Security taxes if they, their employer, and the sect, order, or organization they belong to officially decline to accept Social Security benefits for retirement, disability, death, or medical care. Members of such groups must apply using IRS Form 4029 to receive the exemption. Several restrictions apply, including:
- The group must have been in existence since 1950.
- The group must have provided its members with a realistic standard of living since that time.
Certain Foreign Visitors
Nonresident aliens employed in the U.S. normally pay Social Security tax on any income they earn here but there are some exceptions. They mostly apply to foreign government employees, students, and educators living and working in the country temporarily. They must possess the correct type of visa. Their families and domestic workers can also be exempt in some cases.
Some American College Students
American college and university students who work part-time at their schools may also qualify for an exemption from the Social Security tax. The job must be contingent on the student’s full-time enrollment at the college or university or half-time status if they're attending in the last semester, trimester, or quarter.
Their relationship with the school, college, or university must be"student." The individual must predominantly be attending the school for education, not employment reasons.
Income beyond $168,600 a year in 2024 isn't subject to Social Security tax but Medicare tax applies to all income.
Pre-1984 Federal Employees
Civilian employees of the federal government who started their jobs before 1984 are covered under the Civil Service Retirement System (CSRS). Those who were hired in 1984 or later are part of the Federal Employees Retirement System (FERS). Workers covered by the CSRS aren't required to pay Social Security taxes but they won't receive Social Security benefits either. Those covered by FERS are part of the Social Security system and must pay the tax.
Certain State and Local Government Workers
State and local government employees may or may not pay Social Security taxes. This includes those working for a public school system, college, or university. They must make Social Security contributions if they're covered by both a pension plan and Social Security but they don’t have to contribute to the Social Security system if they're covered solely by a pension plan.
How Is Social Security Tax Calculated?
Social Security tax is calculated as a percentage of your gross wages with specific rates set by the government. The Social Security tax rate is 6.2% for employees and employers as of 2024 for a total of 12.4% when combined. This percentage does not include Medicare taxes.
Do Self-Employed Individuals Pay Social Security Tax?
Yes, self-employed individuals are responsible for paying both the employee and employer portions of the Social Security tax. They're also responsible for paying for both the employee and employer portions of Medicare. This is known as the self-employment tax.
Can I Claim a Tax Credit for Social Security Taxes I Paid?
No, there's no tax credit specifically for Social Security taxes you've paid but an exception exists for self-employed individuals. They can claim a tax deduction for half Social Security taxes they've to account for what would have been the employer's contributions.
Social Security tax contributions may be deductible from your taxable income in certain other circ*mstances as well. Discuss your specific situation with a tax advisor to find out if you qualify.
Can I Get a Refund of Excess Social Security Taxes Withheld?
You generally can't opt out of paying Social Security tax. It's a mandatory tax in the United States and most workers are required to contribute to the Social Security system. You can potentially receive a refund when you file your federal income tax return, however, if you overpay Social Security tax due to having multiple jobs or other factors.
The Bottom Line
When do you stop paying Social Security tax? The answer is almost always "never" as long as you're employed but there are exceptions. Consider consulting with a tax professional if you think any of these situations or exceptions might apply to you.
