Social Security Tax

AAA

DEFINITION of 'Social Security Tax'

The tax levied on both employers and employees used to fund the Social Security program. Social Security tax is usually collected in the form of payroll tax or self-employment tax. The Social Security tax pays for the retirement and disability benefits received by millions of Americans each year.

INVESTOPEDIA EXPLAINS 'Social Security Tax'

The funds collected from employees for Social Security are not put into a trust for the individual employee currently paying into the system, but rather are used to pay existing retirees. Also, Social Security tax can refer to the tax on the benefits received from Social Security. In the past, Social Security was tax free, but today if you have other substantial income along with your benefits, you will likely end up paying some tax on them.

RELATED TERMS
  1. Local Tax

    A tax assessed and levied by a local authority such as a county ...
  2. Social Security

    A United States federal program of social insurance and benefits ...
  3. Self-Employment Tax

    Money that a small business owner must pay to the federal government ...
  4. Payroll Tax

    Tax an employer withholds and/or pays on behalf of their employees ...
  5. Smart Traveler Enrollment Program

    A service of the U.S. Department of State that lets U.S. citizens ...
  6. Separation Of Powers

    An organizational structure in which responsibilities, authorities, ...
RELATED FAQS
  1. How do I calculate my Social Security break-even age?

    Individuals nearing retirement can implement a number of strategies to cover living expenses during their post-working years. ... Read Full Answer >>
  2. Is there any way to opt out of paying Social Security?

    Exemptions from the Social Security program exist for a small number of groups. These individuals are not responsible for ... Read Full Answer >>
  3. How are taxes treated in the consumer price index (CPI)?

    The answer to the question of how taxes are treated in the Consumer Price Index, or CPI, relates to the overall questions ... Read Full Answer >>
  4. Who is exempt from paying Social Security taxes?

    Social Security is a U. S. federal program that provides recipients with benefits, including retirement and disability income, ... Read Full Answer >>
  5. What are the Social Security tax caps?

    The Social Security tax cap limits the amount of annual wages or self-employment income that is eligible for Social Security ... Read Full Answer >>
  6. How much of my income goes to Social Security taxes?

    An employee's portion of social security tax is 6.2% of his or her social security wages. Employers are taxed at the same ... Read Full Answer >>
  7. Must I pay Social Security taxes on my earnings after full retirement age?

    Everyone must make applicable Social Security contributions on income, even those working past the full retirement age. Working ... Read Full Answer >>
Related Articles
  1. Retirement

    How Much Social Security Will You Get?

    You've been paying in for years - now it's time to find out what the system owes you.
  2. Retirement

    Create Your Own Social Security Fund

    The government's Social Security program may not last forever - be prepared by setting up your own.
  3. Budgeting

    Managing Income During Retirement

    Learn some sensible strategies for making your hard-earned savings last for as long as you need them.
  4. Retirement

    Will Your Retirement Income Be Enough?

    Find out how to determine whether you're on the path to a comfortable retirement, or financial ruin.
  5. Retirement

    Maximize Your Social Security Benefits

    The plan's cost of living adjustments can provide protection against inflation.
  6. Taxes

    Avoid The Social Security Tax Trap

    Government benefits can cost you big money! Know the income thresholds before you file.
  7. Retirement

    10 Common Questions About Social Security

    Find out everything you need to know about this program.
  8. Retirement

    Top 6 Myths About Social Security Benefits

    Misinformation on retirement benefits is common. We'll set the record straight.
  9. Retirement

    Some Tax Considerations For Your Retirement Income

    Even if you don’t plan to retire, it’s still a good idea to think ahead about where to live, your income and how it all interacts with Social Security.
  10. Professionals

    Top Tips for Retirement Account Withdrawals

    Top things you need to know when it comes to managing the complex task of retirement account withdrawals.

You May Also Like

Hot Definitions
  1. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  2. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  3. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  4. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  5. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  6. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
Trading Center