1. What is Social Security Tax?

Social Security tax is a payroll tax collected to fund the Social Security program, which provides retirement, disability, and survivor benefits. Employees and employers each pay 6.2% of wages up to the wage base limit.

2. How Is Social Security Tax Calculated?

The calculator uses the Social Security tax formula:

Where:

• \( \text{Income} \) — Annual wages or self-employment income
• \( \text{Wage Base} \) — Maximum taxable earnings ($160,200 in 2023)
• \( 0.062 \) — Social Security tax rate (6.2%)

Explanation: The tax is calculated on earnings up to the wage base limit. Income above this limit is not subject to Social Security tax.

3. Importance of Social Security Tax

Details: Social Security tax funds the Social Security program that provides benefits to retired workers, disabled individuals, and survivors of deceased workers. Understanding your tax helps with financial planning.

4. Using the Calculator

Tips: Enter your annual income and the current wage base (default is $160,200 for 2023). The calculator will determine your Social Security tax obligation.

5. Frequently Asked Questions (FAQ)

Q1: What's the current Social Security tax rate?
A: The employee portion is 6.2% (employer matches another 6.2%). Self-employed pay the full 12.4%.

Q2: Does the wage base change annually?
A: Yes, it's adjusted for inflation. In 2023 it's $160,200, up from $147,000 in 2022.

Q3: Are bonuses subject to Social Security tax?
A: Yes, bonuses count as wages and are subject to Social Security tax up to the wage base.

Q4: Do self-employed people pay more?
A: Self-employed individuals pay both employee and employer portions (12.4% total), but can deduct half on their taxes.

Q5: Is there Social Security tax on investment income?
A: No, only earned income (wages, self-employment income) is subject to Social Security tax.