What Is Social Security Tax?

Social Security tax is a federal payroll tax that funds the Social Security program, which provides retirement, disability, and survivor benefits to eligible Americans. It's part of the Federal Insurance Contributions Act (FICA) tax, which also includes Medicare taxes. Together, these help fund the social safety net that millions of Americans depend on.

Social Security participation is mandatory for most workers. When you run payroll, you'll see Social Security tax deducted from each employee's paycheck, and your business pays an equal amount as the employer contribution. This shared responsibility means that for every dollar your employee pays into the Social Security tax, your company matches it.

How Much Is the Social Security Tax Rate in 2025?

The Social Security tax rate for 2025 remains at 6.2% for employees and 6.2% for employers, creating a total contribution of 12.4%. Self-employed individuals pay the full 12.4% themselves, though they can deduct half this amount on their tax returns. The tax rate on Social Security applies to wages, salaries, bonuses, and most other forms of compensation your employees receive. Unlike some tax rates that change annually, the percentage of Social Security tax hasn't changed since 1990.

Who Pays for Social Security Tax?

When it comes to payroll compliance, the question "Do you pay taxes on Social Security?" comes up frequently. The answer is yes: wage-earning employees, their employers, and self-employed individuals pay taxes on Social Security in most cases.

As an employer, you're responsible for withholding 6.2% from each paycheck as the Social Security employee tax and contributing an additional 6.2% from your company funds. Self-employed individuals calculate and pay the full Social Security portion through their annual tax filings using Schedule SE. At what income level is Social Security taxed depends on your overall income — including wages, salaries, and self-employment earnings — up to the annual wage base limit ($176,100 for 2025).

Social Security Tax Examples

Here's an example of how Social Security is taxed to help you understand the calculations. Imagine your employee, Olivia, earns $60,000 annually. Her Social Security tax contribution is $3,720 ($60,000 × 6.2%), which you'll withhold from her paychecks throughout the year. Your company also pays $3,720, bringing the total Social Security contribution to $7,440.

Now, let's look at a self-employed example to see how much Social Security tax is owed each year. Jamie runs his own consulting business and earns $60,000 throughout the year. He pays the full 12.4% Social Security tax, which equals $7,440. However, Jamie can deduct half his self-employment tax ($3,720) when calculating his adjusted gross income, which reduces his overall tax liability. The table below shows a quick recap of how to calculate Social Security tax using a $60,000 salary example.

Social Security Tax Exemptions

While most workers pay Social Security tax, certain groups qualify for exemptions:

• Public Sector Workers: Some state and government employees with qualifying public retirement systems comparable to Social Security.
• Nonresident Aliens: Certain nonresident aliens, such as scholars, professors, physicians, and au pairs, in specific visa classes.
• Religious Organizations: Members of specific religious groups who have filed for and received exemption.
• Students: Currently enrolled students working at their university, college, or school.
• Young Workers: Workers under age 18 employed by their parents in certain family business arrangements.
• Foreign Government Employees: Ambassadors, diplomatic and consular officers, and nondiplomatic representatives working in the U.S.

Workers outside these groups may wonder, "Why am I paying Social Security tax?" However, participation is mandatory for nearly all U.S. workers.

Keep in mind that choosing exemption means giving up future Social Security benefits. Because of how Social Security is taxed, individuals who don't contribute during their working years can't collect retirement, disability, or survivor benefits later.

What Is the Social Security Tax Income Limit for 2025?

The Social Security tax limit in 2025 applies to the first $176,100 of an employee's annual earnings, an increase from 2024's Social Security tax cap of $168,600. This means any employee earning above $176,100 will stop paying Social Security tax once they hit that threshold. For example, an employee earning $200,000 annually will pay Social Security tax on only the first $176,100, saving them $1,482 in Social Security taxes compared to if there were no cap.

Are Social Security Benefits Taxed?

Yes, Social Security benefits can be subject to federal income taxes. How are social security benefits taxed? It depends on the recipient's total income and filing status. For single filers, benefits become partially taxable when combined income exceeds $25,000, while Social Security is taxed at the $32,000 threshold for married couples filing jointly. If you're wondering, "What is the tax rate on Social Security benefits?" — the IRS can tax up to 85% of benefits depending on income and tax filing status.

Can I Have Taxes Withheld From My Social Security Benefits?

Recipients of Social Security can voluntarily request Social Security tax to be withheld from each payment. In other words, when people ask, "What is the tax on Social Security?" the answer depends on whether they choose to have it withheld throughout the year or pay in one lump sum at tax time.

Is Social Security Taxable if It's My Only Income?

When Social Security is someone's sole source of income, it's unlikely they'll owe taxes on those benefits. For example, single individuals receiving only Social Security would need more than $25,000 in annual benefits for any portion to become taxable, while married couples would need combined benefits exceeding $32,000. The average retiree receives about $23,712 per year from Social Security — below the taxable income thresholds.

At What Age Is Social Security Not Taxable?

Some people wonder, "Is Social Security taxed after age 70?" Age itself doesn't determine whether there's tax on Social Security benefits — income level and filing status do. Recipients can begin claiming Social Security retirement benefits as early as age 62, though benefits are reduced if claimed before full retirement age. However, someone collecting benefits at 62 faces the same tax calculations as someone who waited until 70 to claim, assuming identical income levels.

Strategies To Reduce Taxes on Social Security

Several approaches can reduce what part of Social Security is taxed. Delaying Social Security benefits until full retirement age and managing income sources strategically can help to keep income below Social Security tax limits. Other strategies include timing retirement account withdrawals, using qualified charitable distributions, and coordinating with a tax professional to optimize your overall retirement income plan.

Will Social Security Be Tax-Free Under Recent Law?

Recent legislation enacted in 2025 does not change the underlying rules about how Social Security benefits are taxed. However, it introduces a temporary $6,000 additional deduction for individuals aged 65 and older through 2028. Eligibility for the deduction phases out at a modified adjusted gross income (MAGI) above $75,000 for individuals and $150,000 for married taxpayers filing jointly.

Navigating Social Security Tax

Payroll tax and Social Security tax compliance touches every aspect of your payroll operations, yet it's one of those areas where a single misstep can create headaches that ripple through your entire organization. One day you're explaining to your highest-paid sales director why their take-home pay suddenly jumped in November, and the next you're fielding questions from a college intern about why they're not seeing Social Security deductions on their paycheck. Staying ahead of Social Security tax rules isn’t just about compliance — it’s about keeping your team informed, your processes smooth, and your business protected.