Social Secuirty Tax at a Glance

The Federal Insurance Contributions Act or FICA is a payroll tax which is imposed on employees and employers. That tax helps to fund social Security and Medicare. These programs help retirees to pay for health care, as well as to receive an income for retirement. Social Security payments may also be made to the disabled or children of deceased workers.

The amount that an employer and their employee pay in social security taxes is directly related to the amount that the employee can receive in benefits should they retire or become disabled.

The Social Security tax rate is considered a regressive tax as there is no standard deduction allowed. Social Security taxes include a higher tax rate for those that make a lower salary, as a percentage of their salary. In addition, the social security tax rate no longer applies once the taxpayer has reached the maximum threshold of around $107,000. That translates to those making a higher salary, paying less towards the tax, as a percentage of their overall salary.

The Social security tax includes a tax rate of about 13 percent of an individual’s salary. However, the employer and employee share that tax burden and the percentage is divided equally between the two. The social security tax must be withheld from each paycheck and is generally paid by the employer on a quarterly basis.

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