Who Is Exempt From Paying Into Social Security?

Almost all U.S. workers are required to contribute part of their paychecks to the Old Age, Survivors, and Disability Insurance (OASDI) program, which most of us know as Social Security. This pension program is an important source of income for many retirees. According to the most recent statistics, 79% of individuals received at least 50% of their retirement income from Social Security. About 27% of recipients get 90% of their income from this source.

The OASDI tax noted on your paycheck funds this comprehensive federal benefits program that provides benefits to retired adults and people with disabilities as well as their spouses, children, and survivors. The goal of the program is to partially replace any income that is lost due to old age, the death of a spouse or qualifying ex-spouse, or because of a disability.

Social Security benefits go back to the days of the Great Depression. They were created as part of a social safety net designed to reduce poverty and provide care for aging adults and people with disabilities. The program is funded by taxpayer dollars, primarily through payroll deductions. While most American taxpayers do not qualify for an exemption from Social Security taxes. However, they do exist for a small number of people.

Key Takeaways

  • Most U.S. workers are automatically enrolled in the Social Security program but a few groups are exempt from paying taxes into the Social Security system.
  • Members of certain religious groups are often exempt.
  • Most foreign academics and researchers are exempt if they are non-immigrant and non-resident aliens.
  • Self-employed workers who make less than $400 annually do not pay Social Security taxes.
  • All individuals are exempt from paying the tax on wages above a certain threshold.

OASDI Tax: Rates, How It Works & Exemptions

The legislation that established the OASDI tax requires that it must automatically be withheld from employee paychecks at a rate of 6.2%. Your employer is also required to pay a matching 6.2%, making the total tax 12.4%. That's a pretty high rate, considering that the Medicare tax is only 1.45%.

But there are limits to the tax. There is a maximum level of taxable income, which can change from year to year due to inflationary pressures, above which the tax doesn't apply. This limit is $147,000 for 2022 and $160,200 for 2023.

The OASDI tax applies to both traditional employees and self-employed individuals. If you’re self-employed, this means that you are expected to pay the entire 12.4% tax on your earned income. However, self-employed workers are also permitted to deduct half of the OASDI tax paid on their annual tax filings.

Who Gets Social Security Benefits?

Before we do anything, it's important to understand Social Security. It actually encompasses several payment programs. These programs include:

  • Direct cash benefits
  • Payments to surviving family members in the event of the enrollee's death
  • Assistance for people with documented disabilities who are unable to continue working

Now let's review who actually is eligible for Social Security. Most people who receive benefits are retirees who paid taxes that supported the program during their careers and now receive a monthly check. More precisely, these benefits are provided to workers who have paid Social Security taxes for at least 40 credits (quarters of coverage) or 10 years.

Social Security is a pay-as-you-go system, with current workers covering the costs of benefits provided to current recipients. The Social Security program automatically enrolls most U.S. workers. Enrollment is connected to the Social Security numbers (SSNs) of workers and taxpayers within the U.S.

Who Is Exempt From Paying Social Security?

Members of certain religious groups may be exempt from Social Security taxes. To become exempt, they must waive their rights to benefits, including hospital insurance benefits. They must also be a member of a religious sect that is conscientiously opposed to receiving private death and retirement benefits and provides food, shelter, and medical care for its members.

Most foreign students, scholars, teachers, and researchers are exempt if they are non-immigrant and non-resident aliens. Foreign citizens who work in the U.S. for a foreign government (for example, as diplomats or consular officials), also do not need to pay. State and local government employees covered under a public retirement plan do not need to pay twice by paying into Social Security.

Self-employed workers who make less than $400 annually do not need to worry about paying Social Security taxes. High-income individuals are also exempt from paying the tax on any earnings over the $147,000 threshold in 2022 and $160,200 in 2023. This reduces their overall Social Security tax liability.

The current Social Security tax rate is a 6.2% tax on both the employee and employer, for a total of 12.4%. If you are self-employed and make more than $400, you must cover both the employee and employer portions.

How to Get Exempt Status

Officially joining an exempt group may require an application to the IRS. Taxpayers who wish to qualify for a religious exemption usually have to apply and specifically ask the Internal Revenue Service (IRS) for an exemption from paying self-employment taxes as well. The IRS grants exemptions to ministers, members of the clergy, and Christian Science practitioners on a regular basis.

Members of religious orders who have taken a vow of poverty are exempt from paying self-employment taxes on work performed for the order and they don't need to request a separate exemption. However, if the order elects to be covered under Social Security, then taxes would apply. Taxes would also apply for any work performed outside of the order.

As these examples demonstrate, becoming exempt from paying Social Security taxes requires specific action by the taxpayer and special permission from the IRS. As such, there is no legal way to stop paying Social Security taxes without applying and receiving approval or becoming a member of a group that is already exempt.

Who Is Eligible for a Social Security Administration Exemption?

The majority of working Americans must pay Social Security taxes. But there are certain exceptions to the rule. For instance, you are exempt from paying Social Security taxes if you waive the right to any related benefits and meet other conditions. Members of religious orders who take a vow of poverty can also get an exemption.

Can Anyone Opt Out of Social Security?

Not everyone can opt-out of Social Security. But you can if you are a member of an eligible religious sect or a member of the clergy who's taken a vow of silence. In order to qualify, you must fill out file Form 4361 with the IRS.

Can Clergy Opt Out of Social Security?

Yes, clergy can opt-out of Social Security. You can do so by filing Form 4361 with the IRS. Other individuals who can use this form include members of certain religious orders and those who follow Christian Science.

How Many Years Do You Have to Pay Into Social Security?

You need 40 credits in order to qualify for Social Security benefits. This means that you need to be in the workforce and pay Social Security taxes for at least 10 years. If you stop working at any time, any credits you accumulate remain intact. When you reenter the workforce, new credits are added to that balance.

The Bottom Line

OASDI tax is automatically withheld from employee paychecks at a rate of 6.2% in order to pay for social security. Most U.S. workers are enrolled in the program, but all individuals are exempt from paying the tax on wages above a certain threshold.

In addition, a few groups are exempt from paying taxes into the Social Security system. Most foreign academics and researchers are exempt if they are non-immigrant and non-resident aliens, for example. Self-employed workers who make less than $400 annually do not pay Social Security taxes.

Article Sources
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  1. Social Security Administration. "Fact Sheet: Social Security," Page 1.

  2. Social Security Administration. "Fact Sheet Social Security 2023 Social Security Changes," Page 1.

  3. IRS.gov. “Topic No.751 Social Security and Medicare Withholding Rates.”

  4. Social Security Administration. "Retirement Benefits."

  5. National Academy of Social Insurance. "What Is Social Security?"

  6. Social Security Administration. "Are members of religious groups exempt from paying Social Security taxes?"

  7. Internal Revenue Service. "Social Security/Medicare and Self-Employment Tax Liability of Foreign Students, Scholars, Teachers, Researchers, and Trainees."

  8. Social Security Administration. "Social Security Coverage for Employees of Foreign Governments and Instrumentalities of Foreign Governments Working in the United States," Pages 1-2.

  9. Social Security Administration. "Frequently Asked Questions: What Is a Section 218 Agreement?"

  10. Internal Revenue Service. "Topic No. 554 Self-Employment Tax."

  11. Internal Revenue Service. "Topic No. 751 Social Security and Medicare Withholding Rates."

  12. Internal Revenue Service. "Form 4029: Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits."

  13. Internal Revenue Service. "Publication 517: Social Security and Other Information for Members of the Clergy and Religious Workers."

  14. Internal Revenue Service. "For 4361: Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners."

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