How Much Social Security Tax Do I Pay?

By Maurie Backman Markets Fool.com

Social Security helps millions of seniors and disabled Americans stay afloat financially, but to fund the program, current workers all need to contribute a portion of their earnings. So just how much does Social Security take out of your check? The amount of Social Security tax you're liable for will depend on your income, but if you're a high earner, you should know that this year, only your first $127,200 in wages will be subject to Social Security taxes.

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How Social Security works

Social Security is a pay-as-you-go system. Current workers pay taxes on some or all of their income, and those taxes are used to pay today's beneficiaries. When today's workers retire, they'll get to collect their fair share when future workers' paychecks are taxed.

If you're a current worker, 12.4% of your wages will be taxed for Social Security purposes. However, because employers and employees split this tax down the middle, you'll only lose 6.2% of your paycheck to Social Security taxes; your employer will be responsible for paying the rest. So if you earn $50,000 a year, you'll lose $3,100 of your income to Social Security taxes, and your employer will be responsible for paying an additional $3,100.

Now, if you're self-employed, there's some bad news: You're responsible for both the employee and employer portion of the this tax. So if you earn $50,000 a year, you'll need to pay the full 12.4% of your earnings, or $6,200, in Social Security taxes. If that seems unfair, worry not -- you can deduct the employer portion of your tax payment on your federal return.

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A cap on Social Security taxes

Each year, Social Security's Old-Age, Survivors, and Disability Insurance (OASDI) program sets a limit for the amount of earnings subject to taxes. For 2017, this limit is $127,200. This means that if you make less than $127,200, your entire earnings will be taxed for Social Security purposes, but any earnings above that threshold are exempt. This also means that someone making $127,200 a year and someone making $2 million a year will pay the exact same amount of Social Security tax under the current system, for a maximum of $7,886.40 for the year.

An increase from last year

Higher earners might feel the sting this year when they see how much money they're losing to Social Security taxes. For the past two years, the maximum income subject to Social Security taxes was $118,500. So while workers earning less than $118,500 won't notice a change in their taxes, those earning more will be impacted. Specifically, if you earn $127,200 or above, you'll pay an extra $539.40 this year in taxes, assuming you're not self-employed. If you are self-employed, your increase will double, though you will get that deduction I mentioned earlier. But because you'll be responsible for paying estimated taxes quarterly, you'll need to be prepared to fork over more of your income along the way.

This certainly isn't the first time the income cap for Social Security taxes has increased over time. The following table shows how this limit has evolved over the past decade:

Year

Maximum Taxable Income

2008

$102,000

2009

$106,800

2010

$106,800

2011

$106,800

2012

$110,100

2013

$113,700

2014

$117,000

2015

$118,500

2016

$118,500

2017

$127,200

DATA SOURCE: SOCIAL SECURITY ADMINISTRATION.

As you can see, the limit for earnings subject to Social Security taxes tends to increase over time, so don't get too comfortable with the current cap.

But there's a reason for those taxes

Nobody wants to lose extra money to Social Security taxes, but the thing to remember is that paying into the system helps ensure that it's there for you when it's your turn to collect benefits. Social Security is a critical source of income for seniors and disabled workers who need it the most, and without taxes, this crucial program couldn't exist in the first place.

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