What is the Social Security tax?

Social Security tax is a federal payroll tax that funds retirement, disability, and survivor benefits. Employees pay 6.2% of wages up to the annual wage base, which is $168,600 for 2024. Employers match the 6.2%, making the combined rate 12.4%. Self-employed individuals pay the full 12.4% through self-employment tax, though half is deductible.

The wage base ceiling

Once wages exceed the annual wage base, Social Security tax stops. If you earn $200,000, you pay Social Security tax only on the first $168,600. The remaining $31,400 is exempt from Social Security but still subject to Medicare. This ceiling adjusts annually with inflation. High earners effectively receive a payroll tax cut once they reach the cap.

Multiple employer situations

If you work multiple jobs, each employer withholds Social Security tax independently. You might overpay if combined wages exceed the wage base. Claim the excess as a credit on your tax return. Employers cannot refund the overpayment directly because each employer's records show wages under the cap.