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What Are the Different Social Security Tax Brackets?

A Social Security benefits application.
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  • Written By: C. Daw
  • Edited By: O. Wallace
  • Last Modified Date: 16 December 2014
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Every week employees see their paychecks reduced by taxes, including social security taxes, which consist of Federal Insurance Contribution Act (FICA) and Medicare taxes. The FICA tax is collected to fund several different programs, with the two major programs being the Old Age Survivors and Disability Insurance and the Retirement Survivors and Disability Insurance. The Medicare tax is collected to fund the Medicare Insurance program. These taxes have to be paid, and no matter which of the two social security tax brackets that a person falls into, local and federal laws ensure that everyone pays the required amounts.

These social security tax brackets are very different depending on if the taxpayer is an employee or self-employed. The FICA tax rate is a percentage of the gross wages and for employees this amount is divided between the employer and the employee. The employer portion of the taxes that need to be paid are usually slightly higher than what the employee pays. The Medicare tax withholding also comes out of employee paychecks each week and this is based at a percentage of the gross earnings as well. For this tax the employer and employee split the tax equally.

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There is a cap put on the FICA tax so when a taxpayer moves into one of the higher social security tax brackets they no longer need to pay the tax for the year. For FICA, once an employee reaches the total income that has been set, or has paid the required amount for the year in FICA taxes, they no longer need to pay into it. If the employee changes jobs in the middle of the year, the new employer is required to continue the FICA tax withholding until the employee reaches this income cap, using only the wages from their new employment. If an overpayment to FICA tax is paid during the year, a taxpayer will be able to receive a refund when they file their Federal Income Taxes for the year. The Medicare tax does not have different social security tax brackets, so every taxpayer will need to pay this tax on their total wages.

One of the social security tax brackets is self-employed taxpayers. In this case there is no employer to split the cost with so the self-employed taxpayer must submit the entire percentage of taxes. For FICA taxes, the self-employed person must pay the entire percentage that has been set for the year of their gross earnings. The cap still exists for the self-employed so once they meet that threshold they do not owe any more FICA taxes for the year. If they started their self-employment after the start of the year, they cannot count their previous wages towards this cap. The Medicare tax will also need to be paid at the full percentage amount as mentioned above.

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