The Social Security Tax Rate

January 20, 2012 by Admin

What is the Social Security Tax Rate?

The Social Security tax rate is 12.4 % of wage earnings.  Employers pay half and employees pay half.  If you are self-employed, then well guess what you pay 100%.

There is a limit to the social security tax, and if you make more than a certain amount per year, then you don’t pay any extra. For 2011, that amount is $106,800.  For 2012, that will be $110,100.

Was There a Social Security Tax Rate Cut for 2011?

Good news for 2011: there was a special social security tax rate reduction just for this year.  The amount paid by the employee, which has traditionally been 6.2%, was reduced to 4.2%.  Employer portion remains at 6.2%, however.

Social Security is also known as Old-Age, Survivors, and Disability Insurance (OASDI).  Everyone who earns wages pays into it.

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What is the Social Security Tax?

November 20, 2011 by Admin

The Social Security tax covers aid to people who can’t work.  Our government gives money benefits to people who are old and who payed into the system, who survive a spouse who paid into the system, and those who are on disability and can’t work.  Medicare’s Hospital Insurance is also funded by the Social Security tax.

Working people pay into the Social Security tax fund during their entire working lives, then receive benefits once they can’t work.  That’s the theory, anyway.  These days the Social Security tax fund has shrunk and may soon become unable to support the people who rely on it.  Therefore, today’s working people should plan to have other sources of income once they retire.

The Social Security tax started in 1937, after the Social Security Act of 1935 was put into place as part of Franklin D. Roosevelt’s New Deal.  The original act was amended and covers severeral social welfare programs.  However, not all of these programs administered under the Act are funded by the Social Security tax.  Some of the programs covered under the Act are:

  • Medicaid (health program for low income people)
  • SSI (Supplemental Security Income) (not funded by the Social Security tax)
  • Unemployment Benefits
  • OASDI (Old age, survivors, & disability) benefits
  • Temporary Aid for Needy Families

 

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