Social Security Tax Rate

Social Security Tax Overview

The social security tax began with the passage of the Social Security Act in 1935, which established Old Age and Survivor's Insurance. The insurance was to be funded by compulsory deductions from the pay of wage earners. Initially, these deductions were set at 1% of gross wages, and were to be paid by both the employer and the employee, and would continue until retirement age, which was set at 65. By 1948, the amount of these deductions had increased to 3%. Employers have been and continue to be responsible for withholding the social security tax from employee pay.

The tax rate for social security is now governed by the Federal Insurance Contributions Act (FICA). Because of this association, social security taxes are now closely associated with the acronym "FICA".

In addition, the Social Security Act also created the Federal Unemployment Trust Fund. This fund was supported by additional withholdings from employee wages, and was designed to assist the states with their unemployment insurance plans. Later updates have increased the coverage of the unemployment fund, from its original coverage of only those employees engaged in industrial or commercial occupations.

Social Security Tax Rates

The following table can be used to determine the social security tax rate, as well as the upper limit on the amount of taxable earnings to which the tax applies. For example, on earnings of $150,000 in 2010, the amount of employer tax paid would be $6,621.60, which is calculated as follows:

6.2% Tax rate x $106,800 Wage cap = $6,621.60

Tax Year	FICA Tax Rate	Wage Cap
2012	4.2% Employee / 6.2% Employer	$110,100
2011	4.2% Employee / 6.2% Employer	106,800
2010	6.2%	106,800
2009	6.2%	106,800
2008	6.2%	102,000
2007	6.2%	97,500
2006	6.2%	94,200
2005	6.2%	90,000
2004	6.2%	87,900
2003	6.2%	87,000
2002	6.2%	84,900
2001	6.2%	80,400

Note that Social Security is matched by the employee, so the total tax amount paid to the government by the employer is 12.4% (with the exceptions of 2011 and 2012, as noted in the preceding table). A self-employed person is responsible for paying the full amount of the 12.4%.