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How Much Social Security Tax Do You Have to Pay?

how much is social security tax

You usually don't report Social Security taxes on your income tax return.

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The Social Security tax is one part of the Federal Insurance Contributions Act, or FICA, taxes that your employer withholds from your paycheck. The Social Security tax includes not only the portion you pay, but an additional portion your employer pays on your behalf. As of 2012, the employee portion is 4.2 percent and the employer portion is 6.2 percent. If you're self-employed, you pay both portions. However, it doesn't always apply to all of your income.

Only Earned Income

The Social Security tax applies to earned income, such as your salary or wages. It does not apply to unearned income

such as investment income or retirement plan distributions. For example, if you have $90,000 in wages, $10,000 in rental income and $5,000 in capital gains and dividends, you pay the Social Security tax on the $90,000 of earned income.

Annual Limit

The Social Security tax applies to a maximum amount of earned income each year. As of 2012, the limit is set at $110,100. Each year, the limit adjusts to account for inflation. If you have more earned income than the annual limit, you don't have to pay the Social Security tax on that portion of your income. For example, if in 2012 you have $150,100 in earned income, you have to pay the Social Security tax on the first $110,100.

Self-Employment Taxes Offset

Category: Taxes

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