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Social Security tax

AnalyticsTrade Team
AnalyticsTrade Team Last updated on 26 Apr 2023

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Social Security Tax

Social Security tax is a payroll tax imposed by the federal government on both employers and employees to fund Social Security and Medicare programs. The tax is calculated as a percentage of an employee’s wages and is paid to the Internal Revenue Service (IRS). The current rate for Social Security tax is 6.2% for employers and 6.2% for employees, with a maximum taxable wage base of $132,900 for 2020. Self-employed individuals are responsible for the entire 12.4% tax.

History of Social Security Tax

The Social Security tax was first introduced in 1935 as part of the Social Security Act. The tax was initially set at 1% of wages, with a maximum taxable wage base of $3,000. Over the years, the rate and wage base have been adjusted several times to keep up with inflation and the increasing cost of Social Security benefits. In 1990, the rate was increased to 6.2% for both employers and employees, and the wage base was increased to $51,300. In 2020, the wage base was increased to $132,900.

Comparison of Social Security Tax Rates

Year Employer Rate Employee Rate Maximum Taxable Wage Base
1990 6.2% 6.2% $51,300
2020 6.2% 6.2% $132,900

Summary

Social Security tax is a payroll tax imposed by the federal government on both employers and employees to fund Social Security and Medicare programs. The current rate for Social Security tax is 6.2% for employers and 6.2% for employees, with a maximum taxable wage base of $132,900 for 2020. Self-employed individuals are responsible for the entire 12.4% tax. For more information about Social Security tax, visit the IRS website or consult a tax professional.

See Also

  • Medicare Tax
  • Federal Insurance Contributions Act (FICA)
  • Self-Employment Tax
  • Unemployment Tax
  • Income Tax
  • Payroll Tax
  • Taxable Wage Base
  • Tax Withholding
  • Tax Brackets
  • Tax Credits

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